New US automobile tariffs, along with additional proposed tariffs targeting key trading partners, could increase costs and introduce further volatility across property, auto, life, and health insurance lines, according to industry analysts.
AM Best director Ann Modica said the imposition of tariffs may generate uncertainty that affects both underwriting and investment strategies.
Broader geopolitical tensions and potential supply chain disruptions are also likely outcomes. Modica noted that these developments could influence asset markets, capital flows, and investor behavior, contributing to greater market volatility throughout 2025.
The US is considering a 25% tariff on imports from Canada and Mexico, in addition to higher tariffs on Chinese goods. These measures are expected to negatively impact the insurance sector, with particular implications for homeowners’ and personal auto insurance.
Robert Passmore (pictured above), vice president of the personal lines department at the American Property Casualty Insurance Association (APCIA), said the industry is still recovering from elevated inflation and pandemic-related cost increases.
He noted that in the absence of alternative sources for vehicle parts and building materials, insurers may face significant cost pressures once the tariffs are enacted.
On April 2, a 25% tariff on all imported automobiles and parts will take effect, aiming to bolster domestic manufacturing and generate an estimated $100 billion annually.
The agricultural sector is also facing challenges due to escalating trade tensions. Farmers, particularly those exporting soybeans and corn, are bracing for potential retaliatory tariffs from major trading partners like China, Canada, and Mexico. These tariffs could reduce export opportunities and exacerbate financial strains in the farming community.
Robert Hartwig, clinical associate professor at the University of South Carolina, estimated that personal auto claims could also see an $11 billion increase in costs over time because of the tariffs. He also suggested the financial impact could extend across both commercial and residential claims, depending on how the supply chain responds.
Modica further noted that tariffs on steel and aluminum would directly raise the cost of vehicles and parts. Hartwig emphasized the dependence of US auto manufacturing on imported components, particularly from Canada and Mexico, citing a high level of integration in North American supply chains.
Supporters of the tariffs argue that they protect domestic industries by making imported goods more expensive, thereby encouraging consumers to buy American-made products. This protectionist approach is intended to stimulate domestic production, create jobs, and reduce trade deficits.
In response to Trump’s tariff policies, some foreign companies are increasing their investments in the United States.
Hyundai, for example, announced a $20 billion investment, including the construction of a $5.8 billion steel plant in Louisiana. This initiative aims to mitigate tariff impacts and demonstrates a commitment to expanding US operations.
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