A slew of new tariffs, including some specific to vehicles, have many Americans reassessing their plans to buy a car — moving them up to take advantage of today’s tariff-free pricing, or reevaluating whether they want a new car at all, given the economic uncertainty.
President Trump has recently floated the idea of a temporary pause on the 25% tax on imported cars, as a reprieve for automakers.
But even if he goes ahead with that idea, tariffs will still affect the auto industry. And deciding not to purchase a new car won’t fully insulate drivers from price changes, either.
That’s because tariffs are pushing up the prices of parts — so the cost of maintenance and repairs are also poised to rise. And when repairing cars gets more expensive, so does something else: auto insurance.
“These tariffs are going to affect everybody who owns and operates a car,” says Jessica Caldwell, the head of insights at the automotive data company Edmunds.
Repair and maintenance costs will rise
Right now, there’s a 25% tariff on imported new cars. There’s also a plan to impose a 25% tariff on at least some imported car parts, although the details aren’t finalized yet and that is not yet in effect. (Changes to one or both of those tariffs may be what Trump had in mind when he told reporters on April 14 that he was “looking at something to help some of the car companies.”)
But other tariffs are also affecting car parts, including tariffs on steel and aluminum, and a 10% baseline tariff on most imports, as well as a 25% tariff on goods imported from Canada and Mexico that don’t meet the requirements of the USMCA (United States-Mexico-Canada Agreement) trade deal.
Laurent Spence works at a NAPA auto parts shop in Desert Hot Springs, Calif., and rattles off some of the high-turnover products that are already being affected by tariffs. Brake pads from Mexico. Brake rotors from China. Suspension parts from Turkey and Thailand. Tools from Taiwan.
Spence says he used to update about 20 prices a week on the store shelves, many of those markdowns for sales. Now, he says, he’s swapping out prices “every day” — and most of them are trending up.
Seeing the trend, Spence has taken advantage of his employee discount and started to stock up on parts for his own vehicles, which are older and need a lot of work. “Belts, ball joints, control arms,” he says. “I’m just kind of stockpiling on nearly everything that I will need in the future as a just-in-case.” (He bought up coffee beans, too.)
Whether you do your own work or take your car to a shop, when the price of parts goes up, it makes basic maintenance and any needed repairs more expensive.
Magnify this hundreds of thousands of times, and that’s the situation for auto insurers. If every single repair becomes more expensive, so does their overall cost of doing business.
Insurance premiums will eventually be pushed up
If insurers have to pay more for repairs, they’re going to charge more in premiums.
Insurance is, fundamentally, a way of spreading costs out among a big pool of people. As a result, even if you aren’t personally in a crash, your premiums will go up to reflect the higher cost of replacing bumpers and doing bodywork.
That’s true even if you have the bare minimum insurance, says Shannon Martin, an insurance expert at Bankrate.
“If you’re someone with an older car and liability-only coverage, you might think, ‘Well, my rate’s going to stay the same.’ But it won’t,” she says. “You have property damage coverage on your policy that pays for someone else’s vehicle … that is now going to cost more to fix.”
Insurance rates are already painfully high for many customers, averaging more than $2,600 annually for full coverage, according to Bankrate. Rates rose sharply after the pandemic caused supply chain disruptions in vehicle and parts production. Lower supply meant higher prices. After a year or two, insurance premiums soared, with year-over-year increases topping 20%.
Those rate hikes were finally settling down. According to the latest Consumer Price Index data, released last week, insurance prices actually dropped slightly between February and March, and annual increases were back in pre-pandemic territory.
But the introduction of tariffs, Martin says, “really kind of throws a monkey wrench into everything.”
Delays and uncertainty — and some evergreen advice
Drivers shouldn’t expect to see their premiums go up overnight. Insurance rates, as a rule, can’t change as quickly as other prices do.
Companies need to assess their higher costs, and then negotiate with the state regulators who try to protect ratepayers from unreasonable hikes. Even after hikes get approved, your current rates are locked in until your policy renews.
And then there’s the caveat that the tariffs keep changing, with new additions and exemptions and reprieves.
That’s complicating one of President Trump’s stated goals for these tariffs, which is encouraging manufacturers to move to the United States. Companies say it’s tricky to make plans for relocations when the rules keep changing.
It also makes it next to impossible to accurately forecast how much something like, say, auto insurance rates, will rise.
“Any numbers that people give you are just guesses that can change at any moment,” says Martin, “because everything’s so unpredictable right now.”
In these unpredictable times, some age-old advice is still reliable.
Spence recommends having a trusted mechanic. Caldwell reminds drivers to shop around for their best rates. And Martin says the uncertainty about insurance rates is yet another good reason to be careful on the road. A good driving record will help keep your insurance rates low. Unlike tariffs, driving cautiously is something you can control.
Transcript:
AILSA CHANG, HOST:
It makes sense that tariffs on imported cars will lead to higher prices. But did you know that tariffs also push up prices of car parts from around the world, and that in turn will drive up car insurance? NPR’s Camila Domonoske explains why.
CAMILA DOMONOSKE, BYLINE: Tariffs on auto parts specifically are looming, but tariffs on steel, aluminum and imports in general are driving up prices already. Lawrence Spence (ph) works at a NAPA Auto Parts shop in Desert Hot Springs, California.
LAWRENCE SPENCE: Brake pads normally come from Mexico. We have suspension parts that come in from Turkey, from Thailand. A lot of our tool sections come from Taiwan. And then I’m also in charge of price changes, you know, for the labels.
DOMONOSKE: So you’re literally changing the prices on the shelf?
SPENCE: Every day.
DOMONOSKE: Pre-tariffs, he’d swap out some prices at least once a week, often for sales. Now it’s daily and mostly going up. Spence owns two older cars, and he’s been buying up parts for himself.
SPENCE: Absolutely, yeah. So belts, ball joints, control arms – I’m just kind of stockpiling on nearly everything that I will need in the future as a just in case.
DOMONOSKE: When parts get more expensive, that pushes up the cost of repairs and maintenance. And when the cost of repairs goes up, that’s a big expense for insurance companies. Jessica Caldwell is the head of insights at the auto data company Edmunds.
JESSICA CALDWELL: Any time that you’re in a collision and your vehicle needs to be repaired, there requires parts, perhaps some aluminum or steel if you’ve damaged the outside portion of your vehicle. And all that’s going to lead to is higher insurance costs.
DOMONOSKE: Higher insurance costs because if insurance companies have to pay more for repairs, they’re going to charge more in premiums. That’s fundamentally how insurance works, right? It spreads the cost out among a big pool of people, even if you personally don’t get in a crash. And this is true even if you have the bare minimum insurance. Shannon Martin is an insurance expert at Bankrate.
SHANNON MARTIN: If you’re someone who has an older car that’s liability only, you might think, well, my rate’s going to stay the same. But it won’t because you have a property damage coverage on your policy that pays for someone else’s vehicle. That is now going to cost more to fix.
DOMONOSKE: Something similar happened during the pandemic. Supply chain disruptions meant fewer vehicles and car parts available, and prices soared. A year or two later, insurance premiums soared, too, up 20% in a single year. As of this year, those rate hikes had finally settled down.
MARTIN: But the tariff situation really kind of throws a monkey wrench into everything.
DOMONOSKE: Now, there’s a baked-in delay before insurance costs would rise. State regulators will try to protect ratepayers from unreasonable hikes, and current rates are locked in until your policy renews. But Martin warns, eventually, higher costs get passed along. President Trump says the goal of these tariffs is partly to encourage manufacturers to move to the U.S. Although, he also keeps changing the rules with exemptions and reprieves and dealmaking. That makes it hard for companies to plan and hard for drivers to know what to expect from, say, their insurance rates.
MARTIN: So any numbers that people give you are just guesses. That can change at any moment because everything is so unpredictable right now.
DOMONOSKE: In these unpredictable times, some age-old advice is still reliable. Spence recommends having a trusted mechanic. Caldwell reminds folks to shop around. And Martin says, as always, drive carefully, y’all. A good driving record is one of the best things you can control to keep your rates down.
Camila Domonoske, NPR News.
(SOUNDBITE OF LUPE FIASCO SONG, “OUTSIDE”)
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Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.