Tariffs will make auto insurance rates rise even faster by increasing the cost of car parts, “experts warn. Proposed tariffs threaten to upend current auto supply chains, boosting prices, particularly on cars and parts from Canada, Mexico and China,” reports the Baltimore Banner. “As the cost of parts and therefore vehicle repairs rises, insurance companies will have to” raise rates. “There’s no doubt” insurance rates are “going to increase,” notes a veteran insurance agent.
A recent report by Insurify, which helps people shop for policies, estimates an 8% rise in insurance rates by the end of the year, compared to 5% or less before the proposed tariffs.” Experts “agree that disruptions to auto supply chains will have a ripple effect” on insurance rates.
“Free trade agreements prompted the creation of supply chains where parts and vehicles travel back and forth between the U.S., Mexico and Canada multiple times before final assembly….Complex supply chains help automakers squeeze” costs through specialization.
Tariffs could “destroy” those supply chains, said an expert, who is concerned that in response to the tariffs, “automakers may choose to leave the U.S. altogether” to avoid having to pay tariffs every time parts travel back and forth between the U.S. and Canada before final assembly.
“More expensive parts mean mechanics give drivers higher estimates at the body shop, leading to pricier claims for insurance companies,” an insurance agent said. Insurers “would label more cars totaled as replacement values” rise, he added. Insurance rates will go up in response to that, like what happened when the pandemic disrupted the supply chain, driving up the cost of car parts and thus increasing insurance rates.
Trump has cited a U.S. fentanyl emergency as a basis for imposing tariffs on Canada and Mexico, but that’s a completely bogus reason for imposing tariffs on Canada, because Canada isn’t the source of America’s fentanyl. It is the United States that sends fentanyl to Canada (where it fetches a higher price), not Canada that sends fentanyl to the United States. The United States does get a lot of fentanyl from Mexico, although most of that fentanyl is smuggled in by U.S. citizens, not Mexicans.
Trump administration officials have admitted that some tariffs were imposed because Trump was angry about things Canadians said when complaining about his earlier tariffs. A president being mad about what someone says is not an “emergency” and not a legally valid reason for imposing a tariff.
When Trump doubled tariffs on Canadian metals, his White House press secretary “Karoline Leavitt said Trump made the decision based on what the U.S. saw as ‘egregious and insulting‘ comments from Ontario Premier Doug Ford, who had increased energy prices charged by Canada to U.S. consumers in response to earlier tariff hikes by Trump.” But a president feeling insulted is not a national “emergency” that justifies imposing a tariff. And there was nothing “egregious and insulting” about the Premier’s comments.
As Brad Heath notes, “The legal justification for President Trump’s tariffs is that he is responding to an emergency. But the administration says the tariffs depend on whether you ‘make him unhappy,'” to quote Commerce Secretary Howard Lutnick discussing tariffs Trump is threatening to impose on Europe based on a bogus “emergency” rationale. Being “unhappy” is not an emergency.
Trump’s tariffs on steel will wipe out some jobs in the auto industry. Past tariffs on steel and aluminum “resulted in 75,000 fewer manufacturing jobs in firms where steel or aluminum are an input into production,” note two economics professors, by subjecting those firms to “increased costs of inputs” that made their products less competitive. That is far more than the paltry number of jobs gained in the U.S. steel industry due to tariffs on steel, only about “1,000 jobs.”
Tariffs are harmful to the auto industry and wipe out U.S. manufacturing jobs, notes The Wall Street Journal:
The U.S. auto industry is really a North American industry because supply chains in the three countries are highly integrated. In 2024 Canada supplied almost 13% of U.S. imports of auto parts and Mexico nearly 42%. Industry experts say a vehicle made on the continent goes back and forth across borders a half dozen times or more, as companies source components and add value in the most cost-effective ways.
And everyone benefits. The office of the U.S. Trade Representative says that in 2023 the industry added more than $809 billion to the U.S. economy, or about 11.2% of total U.S. manufacturing output, supporting “9.7 million direct and indirect U.S. jobs.” In 2022 the U.S. exported $75.4 billion in vehicles and parts to Canada and Mexico. That number jumped 14% in 2023 to $86.2 billion, according to the American Automotive Policy Council.
American car makers would be much less competitive without this trade. Regional integration is now an industry-wide manufacturing strategy—also employed in Japan, Korea and Europe—aimed at using a variety of high-skilled and low-cost labor markets to source components, software and assembly.
The result has been that U.S. industrial capacity in autos has grown alongside an increase in imported motor vehicles, engines and parts. From 1995-2019, imports of autos, engines and parts rose 169% while U.S. industrial capacity in autos, engines and parts rose 71%….Thousands of good-paying auto jobs in Texas, Ohio, Illinois and Michigan owe their competitiveness to this ecosystem, relying heavily on suppliers in Mexico and Canada….
