Insurance industry experts are monitoring the potential impact of recent tariff announcements, particularly after the White House delayed some tariffs on imports from Canada and Mexico. Tariffs on goods imported from China have already gone into effect, and 25% tariffs on all foreign steel and aluminum imports were implemented in March, according to reports by CNN and The New York Times.
Trade Wars and the Insurance Industry
Canada and Mexico are major trading partners with the U.S., and Canada is the primary supplier of aluminum. Any new tariffs, even if delayed, raise concerns within the insurance industry and beyond. Kenneth Saldanha, senior managing director at Accenture, explained that geopolitical instability is affecting insurance companies, including auto insurance. “Ongoing supply chain disruptions — whether from tariffs, COVID-19, or a port strike — are already impacting the industry,” Saldanha said, as reported by Insurance Business in February. “These disruptions drive up costs for auto parts, building materials, and other essentials, leading to higher indemnity expenses.”
Saldanha also noted that insurance growth is closely tied to gross domestic product (GDP). A global trade war could negatively impact GDP, which would, in turn, affect the insurance industry.
Retaliatory tariffs are also a concern. China and Canada have already announced reciprocal tariffs in response to U.S. actions, according to NPR. Furthermore, scientists suggest that retaliatory measures may increase the risk that rising global temperatures and extreme weather events will not be properly addressed, according to Forbes.
The Impact on Car Insurance
The ramifications of these tariffs are particularly relevant to car owners, with the potential to increase insurance premiums. A recent report from Insurify indicated that car insurance rates spiked 15% last year. As of a January report, drivers paid an average of $2,313 in most states. Rising prices are a significant concern, particularly for drivers of electric vehicles.
EVs often have higher insurance premiums. CNBC reported that insurance for an EV can cost up to 20% more than for a gasoline-powered car, according to the National Association of Insurance Commissioners.
What’s Being Done? How Can Drivers Prepare?
Insurance executives are prioritizing cost-cutting measures as the tariffs take effect, according to Insurance Business. EV drivers can compare rates in order to find the best insurance deal. Driving history, annual mileage, and other factors are used to determine insurance prices.
Despite potentially higher insurance costs, purchasing an EV can save money in the long run due to the absence of gas and reduced maintenance needs. Some EV models even qualify for a $7,500 tax credit, per Car and Driver, although this incentive’s future is uncertain.
