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Impact of Tariffs on North American Auto Industry and Insurance Costs
The North American automotive sector is facing significant challenges due to the imposition of tariffs by U.S. President Donald Trump, affecting not only consumers intending to buy new vehicles but also many existing car owners.
Recent insights from the Canadian Chamber of Commerce indicate that the introduction of these auto tariffs, in conjunction with tariffs on steel and aluminum, are anticipated to result in increased insurance premiums and repair costs for vehicle owners across both Canada and the United States.
A report from the chamber’s Business Development Lab outlines that “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%.” This means that as the cost of repair parts escalates, consumers are likely to bear the brunt of these increases through higher insurance costs when they renew their policies.
Daniel Ivans, an insurance expert and broker at Rates.ca, notes that while liability and injury coverage components of insurance costs might remain stable, the segment dedicated to physical damage—which accounts for a quarter of the average premium—is expected to rise. This portion of the premium covers losses related to accidents, theft, vandalism, and other damages, and it is influenced by the rising costs of repair parts driven by tariffs.
Projected Increases in Auto Insurance Premiums
Experts project that the automotive insurance landscape could experience adjustments between 3% to 8% due to the tariffs, based on current trends. Ivans states that “these are the early estimates based on what we’ve been observing.”
Glen Hodgson, a senior fellow at the CD Howe Institute, offers a more conservative estimation, suggesting that spikes of 5% to 10% in car insurance prices are plausible given the ongoing economic turbulence. These fluctuations can be attributed to the cascading effects tariffs will have on auto prices and related ownership costs.
If the tariffs, which could impose a 25% rate on cross-border vehicle sales, take full effect, costs are expected to significantly affect auto pricing structures and ownership expenses. Ivans highlights that this could necessitate higher payments for vehicle repairs as parts become more expensive, and it remains uncertain whether these cost increases would lead to higher labor expenses at repair facilities due to inflationary pressures.
Navigating Insurance Options for Consumers
In light of these developments, Ivans advises consumers to actively compare insurance rates, particularly in regions like Ontario where the insurance market is privatized, fostering competition among numerous providers.
He encourages consumers to evaluate their options online through aggregators to ensure they secure the most suitable insurance for their specific needs. “The right insurance company isn’t necessarily the right insurance company for every consumer,” he concludes, emphasizing that individual circumstances merit personalized assessments.
The continuing evolution of tariff policies and their implications on the auto industry presents a complex landscape for consumers and businesses alike, highlighting the importance of staying informed and proactive in managing automotive expenditures.
Source
globalnews.ca