The North American car industry is reeling under U.S. President Donald Trump’s tariffs, and experts say it won’t just be those in the market for a new car feeling the hit.
Existing car owners will feel the pinch too.
According to the Canadian Chamber of Commerce, the auto tariffs, coupled with Trump’s tariffs on steel and aluminum, will raise the cost of insurance premiums and repairs for car owners in both Canada and the United States.
“The increase in car prices due to tariffs results in higher repair costs, which subsequently raises insurance premiums. Tariffs on steel and aluminum could further increase repairable claims costs by 1% to 2%,” a recent report by the chamber’s Business Development Lab said.
“As repair parts become more expensive and cars cost more to fix, these expenses will likely be passed on to consumers, resulting in higher premiums when policies are renewed.”
Daniel Ivans, insurance expert and broker with Rates.ca, said the portion of the insurance cost that deals with liability coverage or injury coverage will likely be unaffected.
However, he said a quarter of the average insurance premium goes towards covering physical damage to your vehicle.
This includes losses from collisions, accidents, theft, vandalism, hit and runs or fires. This portion of the premium, he said, will go up as tariffs increase the costs of parts.
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“Overall we’re looking at potentially between three to eight per cent in auto insurance premium increases as a result of tariffs,” he said.
“These are the early estimates based on what we’ve been seeing.”
Glen Hodgson, senior fellow at the CD Howe Institute, estimates steeper hikes.
“We shouldn’t at all be surprised to see a margin of five to 10 per cent added to car insurance prices going forward because of all the turbulence. And it could be higher,” he said.
“If the Trump tariffs really go in place, we have a 25 per cent tariff both ways in North America on the other country’s vehicles. That’ll clearly flow into auto prices and all the costs that go along with owning a car.”
Ivans said this could also mean Canadians taking their cars to the mechanic might have to pay more to have parts replaced.
“Repair costs naturally will increase as the cost of parts themselves increase as well,” he said, adding that it is unclear if the inflationary impact of tariffs will translate to higher labour costs at car repair facilities if employees seek higher wages as the cost of living goes up.
Ivans suggested shopping around for insurance rates depending on where in the country you live.
“In Ontario, insurance is privatized, which means there are a lot of insurance companies that are competing for your business,” he said.
“As a consumer, really every year, what you want to do is you want to hop online and shop, particularly with an aggregator.
“The right insurance company isn’t necessarily the right insurance company for every consumer. Every consumer has unique needs and a unique customer profile.”
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Not buying a new car? How Trump’s auto tariffs will hit current owners too
