President Trump wants new tariffs on steel and aluminum, which could raise the cost of cars.
But as the Wall Street Journal (WSJ) reported Wednesday (Feb. 12), these tariffs could also affect the price of car insurance.
Car insurance costs, that report notes, are especially sensitive to tariffs, because of the impact tariffs have on auto parts and used cars.
It works like this: Tariffs drive up the cost to import auto parts, meaning it could cost more to repair a vehicle. If new cars also become more expensive, that can increase the demand and price tag for a used car, making vehicles more expensive to insure and replace.
According to the report, the cost of car insurance has jumped in recent years. As recently as mid-2024, the cost of insurance was climbing by 20% or more year over year, per monthly U.S. Consumer Price Index data.
The latest data released Wednesday showed that motor vehicle insurance costs were up 11.8% from a year earlier in January, following an 11.3% uptick in December. The cost to repair a car climbed 7.4% year over year, up from 7.2% last month.
Writing about the new inflation figures Wednesday, PYMNTS noted that several components of essential spending — non-variable in nature — are growing more expensive.
“As such, consumers cannot just depend on food prices coming down to soothe the pinch to the household budget and individuals’ wallet,” that report said. “The pinch strains discretionary spending, which has a binary outcome: Either consumers pull back on spending, or they use credit and other lending products to help keep spending apace.”
And as interest rates increase, that report added, keeping discretionary spending aloft becomes harder. That report also noted the uptick in car insurance, meaning “the cost of getting around is higher as well — no matter if one’s ferrying the kids to school or going out for groceries.”
Meanwhile, concerns about tariffs have caused consumer sentiment to hit its lowest level in six months, according to data from the University of Michigan’s February Surveys of Consumers released last week.
Surveys of Consumers Director Joanne Hsu said that while all components of the index declined in February, the drop was “led by a 12% slide in buying conditions for durables, in part due to a perception that it may be too late to avoid the negative impact of tariff policy.”
