How tariffs increase car insurance costs

Tariffs don't apply directly to car insurance, but they can still raise your insurance costs. That's because tariffs apply directly to items that affect the cost of car insurance claims, namely auto parts, steel, and aluminum.

Since the Trump administration's tariffs were enacted, those costs have been passed down to auto dealers and consumers, and the average suggested retail price of a car has increased 10.4%.

Here's how tariffs impact your insurance bill and ways to lower your costs.

Automotive tariffs have triggered a domino effect that could contribute to higher car insurance costs over time.

When tariffs increase the cost of vehicles and auto parts, it becomes more expensive to repair or replace a car after an accident, theft, or other covered loss. As repair and replacement costs rise, insurers often end up paying more for claims. Those higher claim costs can eventually be reflected in car insurance premiums.

"Auto insurance premiums are a reflection of the cost to pay claims," Stephen J. Crewdson, senior director in the Global Insurance Intelligence Group at J.D. Power, a global data and analytics company, said via email. "As these claims costs go up or down, premiums will eventually follow."

While many of the tariffs have been in place for more than a year, insurers, repair shops, and auto manufacturers are still working to assess their direct impact. Because tariffs are only one piece of the cost puzzle affecting repair and replacement expenses, it's difficult to pinpoint exactly how much they may contribute to higher insurance rates.

In April 2026, the American Academy of Actuaries cautioned that tariffs on imported vehicles and auto parts could increase insurers' claim costs, potentially pushing up car insurance rates. At the same time, rising labor costs, supply chain challenges, and increasingly advanced vehicle technology have also made vehicles more expensive to repair and replace.

Several tariffs are affecting the auto industry, including tariffs on imported vehicles, auto parts, steel, and aluminum. Many of them stem from Section 232 of the Trade Expansion Act of 1962, which gives the U.S. government the authority to impose tariffs on certain imports for national security reasons.

While tariffs on imported vehicles tend to make the headlines, their impact extends beyond the dealership. Many of the parts and materials used to build and repair vehicles, including steel and aluminum, can also be subject to tariffs. Because modern vehicles rely on parts sourced from around the world, even cars assembled in the U.S. may be affected by higher import costs.

Learn more: Car insurance rates are rising. These moves may help drivers save.

Although you won't necessarily see a separate "tariff fee" on your auto insurance bill, the impact of import tariffs can show up in some less obvious ways. According to Cox Automotive, tariffs cost the automotive industry an estimated $30 billion during the first full year they were in effect. The company estimates they also increased imported vehicle prices by an average of $5,000 to $8,900 and raised the cost of vehicles assembled in the U.S. by roughly $1,600 to $2,000.

As manufacturers, suppliers, and repair shops adapt to higher costs, some of those expenses can be passed on to consumers through higher vehicle prices, repair costs, and, potentially, auto insurance premiums.

Typically, as vehicle part costs increase, so does the cost of repairing a damaged vehicle. Because insurers usually pay for those repairs after a covered claim, higher repair costs can eventually lead to higher insurance rates.

But remember that while tariffs can contribute to higher car repair costs, they're not the only reason repairs are becoming increasingly more expensive. Other factors, such as increased labor costs, supply chain challenges, and more high-tech features can all add to the final bill.

Since many replacement parts used in U.S. auto repairs are imported, tariffs can have an industrywide ripple effect on repair costs. According to Jon Ward, vice president of public affairs with the American Property Casualty Insurance Association (APCIA), about 6 of every 10 auto replacement parts used in U.S. auto shop repairs are imported from Mexico, Canada, and China.

As repair costs increase, damaged vehicles may be declared a total loss more often. When that happens, insurers typically pay the vehicle's actual cash value (ACV) rather than covering repair costs. In fact, CCC Intelligent Solutions reports that total loss frequency increased to 23.1% across all loss categories, the highest level in the industry to date. This reflects how rising repair costs are changing the economics of repairing versus replacing vehicles.