Betty Lin-FisherUSA TODAY
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Prices for some cars and auto parts aren't the only things that are likely to go up with auto tariffs, which are expected to go into effect on April 2. Add auto insurance to that list, too.
Starting April 2, PresidentDonald Trumpis set toimpose a 25% tariffon imported passenger vehicles, light trucks and some auto parts. For imported cars protected by the United States-Mexico-Canada Agreement, only the foreign parts that make up the vehicle will be subject to the tariff.
The national average cost of full-coverage car insurance could increase by 8% by the end of the year with the tariffs in effect, according to an analysis by Insurify. The average insurance premium would go from $2,313 to $2,502. The cost is likely higher since the analysis was done before President Donald Trump imposed 25% tariffs on aluminum and steel and announced the updated auto tariffs.
Trump had agreed to postpone until early April tariffs on imports from Mexico and Canada that fall under the United States-Mexico-Canada Agreement, or USMCA, a free trade deal he signed in 2019. They make up 50% of Mexican goods coming into the U.S. and 38% of those from Canada.
Without the 25% tariffs on imports, Insurify projected car insurance to increase 5% year over year.
Increase in auto parts raises insurance costs
Many consumers are worried about how the tariffs will affect the costs of their goods, but many aren't thinking about how services they pay for will also be impacted, Matt Brannon, Insurify data journalist who completed the analysis, told USA TODAY.
"It might not be intuitive to people that the tariffs would end up raising people's car insurance rates and the main way they do that is because tariffs would increase the price of car parts," he said. "The cost of car insurance is based in part on the cost of car parts."
One-fifth of the cars and light trucks sold in the U.S. come from Canada and Mexico, Insurify said, and the U.S. imports roughly 32% of its total auto parts from Canada and Mexico.
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According to data released in February by the American Property Casualty Insurance Association, about 6 out of every 10 auto replacement parts used in U.S. auto shop repairs are imported from Mexico, Canada and China.
"If parts become more expensive, car owners will pay more each time they need something fixed," the association said.
Tariffs will also increase the price of new cars. According to Wolfe Research, the tariffs would likely raise the cost of new cars by around $3,000. The average new car costs $48,641, according to Wolf, which estimates tariffs would raise the price to $51,641.
Car insurance rates are based on both replacement costs after an accident as well as the overall cost of a car, said Brannon.
Even if auto insurers tried to source a part made in the U.S. instead of one imported from Mexico or Canada with a tariff tacked on, it might not be cheaper, Brannon said.
"The reality is that a lot of times, these companies in the U.S. will know that the insurer can't pay a cheaper price like they used to in the past, so they'll also tend to raise their prices," he said.
Which state will see the highest auto insurance increases?
Based on existing auto insurance rates, New York will see the highest cost increase in insurance rates, said Brannon. The cost of annual coverage would increase by $489 by the end of the year, with $110 of that increase directly attributed to tariffs.
Tariffs are expected to increase rates in all states, based on Insurify's estimates. Without tariffs, Insurify projects car insurance rates would decrease or remain flat in five states: Vermont, New Hampshire, Hawaii, New Mexico and Idaho.
Consumers are not likely to see any increases to auto insurance rates until the end of the year since most insurers have to get approval from state regulators to increase premiums and that takes time, Brannon said.
"We expect those price increases would show up when drivers renew their policies or switch to a new insurer, rather than in the middle of a six-month coverage period," he said.
Betty Lin-Fisher is a consumer reporter for USA TODAY. Reach her at blinfisher@USATODAY.com or follow her on X, Facebook or Instagram @blinfisher and @blinfisher.bsky.social on Bluesky. Sign up for our free The Daily Money newsletter, which will include consumer news on Fridays, here.
