Tariffs and Your Car Insurance Bill: What Has Actually Happened

Last Updated on November 11, 2026

By James Shaffer Reviewed by Thomas Rockford, insurance industry executive and financial analyst, on November 7, 2026 How we fact-check

When the 25 percent tariff on imported cars took effect in April 2025, the forecasts came fast. One widely quoted projection said the average full coverage premium would rise 8 percent by the end of the year, and a later version said 19 percent. The insurers’ trade group warned of $7 billion to $24 billion a year in added claim costs. Then the year ended, and the average premium went down.

This article walks through what the tariffs are as of November 2026, what the forecasts said, what the data shows so far, why the effect has been slower and smaller than predicted, and what it means for your policy. If you want the broader picture of why rates change, start there.

Quick tip: Tariffs reach your premium through parts prices, and parts prices reach you through collision and comprehensive claims. If you carry liability only, tariffs barely touch your bill.

  1. The Tariffs Are Real and Still in Place: A 25 percent tariff on imported vehicles and most imported parts has been in force since spring 2025, with lower ceilings negotiated for the European Union, Japan, South Korea and the United Kingdom.
  2. The Forecasts Were Wrong, So Far: Average full coverage premiums fell 6 percent in 2025 and were up about 1 percent in the first half of 2026, far short of the 8 to 19 percent increases predicted.
  3. Parts Prices Are Rising: Collision parts cost about 8 percent more in early 2026 than a year earlier, and the companies that process repair estimates tie that to tariffs.
  4. The Lag Is the Story: Insurers need 12 to 18 months of claims data before a cost change shows up in rates, so the tariff effect is still working its way through.
Table Of Contents
  1. Which Tariffs Apply to Cars and Parts
  2. What the Forecasts Said
  3. What Actually Happened to Premiums
  4. The Tariff Effect Is Showing Up in Parts Prices
  5. Who Is Most Exposed
  6. What to Do About It
  7. Frequently Asked Questions
  8. Sources

Which Tariffs Apply to Cars and Parts

The main one is the Section 232 tariff on automobiles. A presidential proclamation signed March 26, 2025 set a 25 percent tariff on imported passenger vehicles and light trucks, effective April 3, 2025, and on a list of imported auto parts, effective May 3, 2025. The White House fact sheet accompanying it said only about 25 percent of the content in a typical US-sold vehicle is made in America.

Several carve-outs and later deals changed the picture.

Country or ruleWhat applies as of November 2026Since
Mexico and Canada (USMCA-qualifying)Vehicles are taxed only on their non-US content. USMCA-compliant parts remain tariff-free.March 26, 2025
European UnionCombined tariff on cars, light trucks and parts capped at 15 percentAugust 1, 2025
JapanTotal tariff capped at 15 percentSeptember 16, 2025
South KoreaTotal tariff capped at 15 percentNovember 1, 2025
United Kingdom10 percent on the first 100,000 vehicles a year, then 27.5 percentJune 30, 2025
TaiwanCertain auto parts capped at 15 percent totalMay 1, 2026
All other countries25 percent on vehicles and covered partsApril and May 2025

US-assembled vehicles get a partial offset against parts tariffs worth 3.75 percent of a vehicle’s suggested retail price. It was originally set to fall to 2.5 percent in May 2026, but an October 2025 proclamation kept it at 3.75 percent through April 30, 2030.

Two things announced in 2026 are not in force as of this writing. In May 2026 the president said he would raise the tariff on European vehicles to 25 percent, and in August 2026 he said tariffs on Canadian cars, trucks and parts would rise to 50 percent on January 1, 2027. As of the November 3, 2026 tariff trackers, the auto tariff on Canadian vehicles was still 25 percent on non-US content and the EU cap was still 15 percent. The Supreme Court’s February 20, 2026 decision striking down the separate tariffs imposed under the International Emergency Economic Powers Act did not touch the Section 232 auto tariffs, which remain in place.

What the Forecasts Said

The predictions in early 2025 ranged widely.

WhoWhenWhat they said
InsurifyFebruary 19, 2025Full coverage would rise 8 percent to $2,502 by the end of 2025, versus a 5 percent rise without tariffs
InsurifyApril 3, 2025With all announced tariffs in effect, $2,759, a 19 percent rise, with New York hit hardest at 24 percent
American Property Casualty Insurance AssociationMarch 31, 2025Claim costs could rise $7 billion to $24 billion a year; effect on bills in 12 to 18 months at the earliest
APCIA, with PartsTraderJune 30, 2025A 25 percent parts tariff could raise auto repair claim costs 2.7 percent, or about $3.4 billion in personal auto premiums
Travelers CEO Alan SchnitzerApril 17, 2025A mid-single-digit increase in personal auto claim severity, as a one-time impact rather than a lasting trend
Allstate CFO Jess MertenMarch 5, 2025A low- to mid-single-digit effect on loss costs

Progressive CEO Tricia Griffith summed up the industry view on the company’s fourth-quarter investor call that same week: tariffs are typically a one-sided risk to loss costs, since they can push costs up and never down.

What Actually Happened to Premiums

Rates fell. Insurify’s own year-end report, published February 3, 2026, found that the average full coverage premium dropped 6 percent in 2025 to $2,144, against its February 2025 projection of an 8 percent rise. Its mid-year 2026 update put the first-half average at $2,237, up 1 percent, and projected $2,242 by year-end.

The government’s price index tells the same story. In the Consumer Price Index for September 2026, released October 14, 2026, motor vehicle insurance was down 5.0 percent from a year earlier. The index did tick up 0.1 percent in September itself. Over the same 12 months, motor vehicle maintenance and repair rose 5.8 percent and all items rose 3.7 percent.

Insurers have mostly been cutting. Allstate told investors in February 2026 that it had lowered rates in 32 states, by an average of 9 percent. California approved a 6.2 percent State Farm auto rate cut effective May 8, 2026. LexisNexis reported that the aggregate rate change in the first quarter of 2026 was a decrease of 1.1 percent, with 35 percent of rate revisions being cuts and 39 percent increases. The Insurance Information Institute wrote in June 2026 that rates are finally settling after the steep increases of 2023 and 2024.

So why were the forecasts so far off? Three reasons.

  1. The tariffs that were modeled were not the ones that happened. Insurify’s February 2025 estimate assumed 25 percent tariffs on all parts from Canada and Mexico. USMCA-qualifying parts ended up exempt, which matters because APCIA said in March 2025 that about six in ten replacement parts used in US repairs come from Mexico, Canada and China.
  2. Insurers were still overpriced from 2023 and 2024. The rate increases of those years were built to catch up with inflation that had already happened. By 2025 the industry was profitable again, and competition pushed rates down regardless of tariffs. Allstate’s auto combined ratio in the third quarter of 2026 was 83.2, which means it spent about 83 cents in claims and expenses for every premium dollar. That figure got help from releasing reserves set aside in earlier years; the underlying ratio, which strips that out along with catastrophe losses, was 89.8, still comfortably profitable.
  3. The lag. Nearly everyone quoted in 2025 said the same thing: 12 to 18 months before tariff costs show up in rates. Insurers price off claims data, and the claims had not happened yet.

The Tariff Effect Is Showing Up in Parts Prices

The repair side is where the tariffs are visible. CCC Intelligent Solutions, which processes a large share of US collision estimates, reported that average parts prices in early 2026 were 8 percent higher than a year earlier, which it said was generally aligned with tariff activity. Its average repair cost for the first half of 2026 was $4,821, and total loss frequency hit 23.5 percent.

Mitchell’s Ryan Mandell said in March 2026 that inflation on bumper covers went from 3.2 percent in 2024 to 6.7 percent in 2025, with the slope turning up around June 2025, two months after the tariffs started. He also pointed out that a part made in the United States can still get more expensive if its raw material, such as polyethylene from China, is tariffed.

Where parts come from matters. Most original equipment parts are made in North America and benefit from the USMCA exemption. Most aftermarket parts come from Asia, especially Taiwan, which is why the cap on Taiwanese parts at 15 percent mattered to body shops. That cap came in a Commerce Department notice filed in late May 2026 and applied retroactively from May 1, and Taiwanese parts had faced an average duty of 26.71 percent before it, according to Taiwan press reports cited by Repairer Driven News. Enlyte’s 2026 trends report found original equipment parts inflation of 4.21 percent in 2025 and aftermarket inflation of 3.89 percent.

The American Academy of Actuaries put the mechanism plainly in an April 2026 issue brief: tariffs have a direct impact on the average claim cost. The brief says property coverages like collision, comprehensive and property damage liability are affected more than bodily injury and medical coverages, and that liability premiums still feel some of it through the property damage side.

Who Is Most Exposed

  • Drivers with collision and comprehensive. Tariffs reach your rate through the cost of fixing cars. If you carry liability only, the main exposure is the property damage you cause to other people’s cars, which is a smaller piece of the bill.
  • Owners of imported models. Every 2025 model year vehicle has at least 20 percent non-US and non-Canadian content, and some have far more. The NHTSA parts-content label on the window sticker shows where a car’s parts come from.
  • Owners of Canadian-built vehicles, if the 50 percent tariff happens. Insurify’s September 2026 analysis listed models built in Canada, including the Chevrolet Silverado, GMC Sierra, Honda Civic and CR-V, Toyota RAV4 Hybrid and Lexus RX 350. Parts for those vehicles would be exposed if the January 2027 increase takes effect as announced.
  • Owners of older cars worth less than a big repair. Higher parts prices push more cars over the total loss line. CCC reported that total loss valuations rose 1.1 percent through September 2026 after falling 3.1 percent a year earlier.

What to Do About It

You cannot do anything about tariffs, but you can do a fair amount about how much of the cost lands on you.

  • Shop at every renewal. A record 47.3 percent of policies were shopped in the 12 months ending in the first quarter of 2026, according to LexisNexis, and the spread between insurers is wide while some companies are cutting rates to grow. Switching takes an afternoon.
  • Rethink your deductible. Raising a collision or comprehensive deductible from $500 to $1,000 typically trims the premium about 10 percent. Just make sure you could pay it, since a tariff-inflated repair means the deductible is more likely to be used in full.
  • Check the parts clause. Progressive says most insurers include aftermarket parts in their repair estimates, that OEM-only coverage has to be added as an option, and that many insurers do not offer it for cars. Right now aftermarket parts are seeing slightly lower inflation than original parts, so the standard clause is not hurting most people on price.
  • Consider a mileage-based program if you drive little. Usage-based programs can save 10 percent or more for low-mileage drivers, and they price you on your own driving rather than the average.
  • Watch January 2027. If the Canadian tariff takes effect, expect parts prices on Canadian-built models to move first and rates to follow a year or more later.

A hypothetical example shows the scale. Say an insurer’s average collision claim is $4,800, and parts make up half of that. An 8 percent rise in parts prices adds about $190 per claim, or 4 percent of the claim’s cost. If collision coverage is $600 of a $2,200 premium, a 4 percent rise in collision costs works out to about $24 a year, if the insurer passes it straight through. That is real money, but it is well short of the $67 to $324 a year in tariff-related increases that Insurify’s two 2025 forecasts implied, and it tends to arrive a year or two after the cost does.

Frequently Asked Questions

Sources

Checked November 7, 2026