How Will Tariffs Impact Auto Insurance Rates? The Academy Is Already Monitoring Possible Effects

By Rob Fischer 
Policy Project Manager, Casualty 

(05/5/25)

It seems like everything is getting more expensive these days. For the past few years, we’ve seen and heard news reports about price increases at grocery stores and higher interest rates due to inflation. But now a new potential cost driver is emerging as a topic for the Casualty Practice Council’s and other practice councils’ work—tariffs. 

The president has moved forward with imposing tariffs with trading partners across the globe. The economic impact of tariffs is generally reflected in price changes and Americans could see an impact in the coming months across sectors, including auto insurance.   

You may be asking yourself, “What do tariffs on foreign manufactured cars have to do with car insurance? I may drive a Japanese, Korean, or German car, but my car insurance is American!” The simplest answer is that the U.S. automotive industry has a very complicated international supply chain.  

Tariffs are government-imposed fees tacked onto imported goods. These fees are paid by the importer and when the imported goods are sold to consumers, the total price paid includes the increased distribution costs. The historical intent of a tariff is to impose a tax on another country’s goods and services in an effort to influence domestic production, raise domestic revenues, or protect competitive advantages. Having been considered a protectionist economic policy, the U.S. has largely stepped away from leveraging tariffs as a primary economic lever as international trade has boomed, especially during the past 30 years.   

While many cars on the road in the U.S. are imported from foreign manufacturers, domestic car manufacturers import parts and materials that are produced overseas. Materials like steel and aluminum for car frames and parts under the hood are typically imported from China. General Motors, for instance, is predicting tariffs will cost it upwards of $5 billion.  

With so many cars, replacement parts, and materials imported to the U.S. that may be subject to tariffs, car replacement costs covered by insurance could rise. If insurers have to pay higher replacement costs, it is very likely that customers will see that reflected in higher insurance premiums.  

Unfortunately, this is not as simple as foreign parts and materials costing more. There are different rules in place for some parts and for specific countries, all dependent upon existing trade agreements. For example, parts that qualify under the U.S.-Mexico-Canada Agreement (USMCA) will receive a reduced tariff. There is also uncertainty as to whether tariffs may apply multiple times, a practice referred to as tariff stacking, as parts and materials repeatedly cross borders.    

The Academy’s Committee on Automobile Insurance is monitoring the potential effects of the administration’s tariffs within the insurance sphere closely and is currently writing an issue brief on actuarial considerations for tariffs from a financial disruption standpoint. This is similar to how the committee examined the COVID-19 pandemic in early 2021.  

There are still many open questions as to how this new economic uncertainty will affect the insurance sector and whether additional changes will be made by the administration. The Academy will continue to pay close attention to the  public policy landscape, providing property and casualty actuaries and the public with the most up-to-date information with timely and insightful actuarial perspective on the implications of such policy decisions.  

With the work products and engagement of our members, the Academy remains an effective voice for the profession and can help policymakers make informed decisions on future steps to help evaluate the short- and long-term implications on access and affordability to financial security systems, including auto insurance.