Even those who are not considering buying a new vehicle may find owning a car more expensive due to U.S. President Donald Trump’s implementation of a 25% tariff on auto imports. The new levies, set to commence on April 3 and expand subsequently, are projected to raise the average price of imported cars by several thousand dollars. Additionally, vehicle repairs that require foreign-manufactured components are anticipated to become costlier, subsequently increasing insurance expenses over time.
Although the White House asserts that these tariffs will promote domestic manufacturing and generate $100 billion in annual revenue, economists emphasize the potential for substantial disruptions to the automotive industry’s global supply chain. This situation might force dealerships and car repair shops to increase their prices, consequently causing drivers nationwide to incur higher costs for routine maintenance.
Impact on Car Repairs
The effect of tariffs on car repair costs will vary depending on the specific repairs needed and the location of the service. However, industry analysts warn that drivers could experience cost increases in the near future. Jessica Caldwell, head of insights at Edmunds, noted that the price of repairs involving foreign-made parts is likely to be directly impacted by the tariffs.
Trump’s recent proclamation on auto tariffs focuses on various components, including engines, transmissions, powertrain parts, and electrical components, which encompass a wide range of repairs. The administration has also hinted at the possibility of future expansions. While automakers may reconsider their pricing strategies for new vehicles, it is anticipated that they will be less inclined to absorb the increased costs of individual parts, leaving consumers to cover the additional expenses more promptly.
A significant portion of the car repair market depends heavily on imports, particularly those from Mexico, Canada, and China. According to data from the American Property Casualty Insurance Association, approximately 60% of auto replacement parts used in U.S. repairs are imported from these countries. Skyler Chadwick, director of Product Consulting at Cox Automotive, highlights the complexity in predicting the exact timing of price increases, given the varying sourcing and supply methods among service providers.
Desiree Hill, who owns Crown’s Corner, an auto repair shop in Conyers, Georgia, reports that the tariffs have already affected her business. She was unable to obtain a part needed for a 1960 Opel Rekord from Germany due to the tariffs, making it challenging to repair foreign-made cars that comprise about half of her work. Hill is left with no choice but to raise service prices if they face increased costs as a result of the tariffs.
Edward Salamy, executive director of the Automotive Body Parts Association, indicates that car companies may seek to monopolize parts supply, further limiting consumer options. Tariffs are expected to worsen this issue, forcing distributors to raise their list prices.
Effect on Car Dealerships
Joshua Allrich, who runs a family-owned used car dealership in Atlanta, expresses concerns about rising costs and the challenges it presents to maintaining affordable prices for customers. With an increase in the cost of economy and affordable cars due to tariffs, his business will likely need to adjust its operations accordingly. Chadwick advises that dealerships and service centers be transparent with customers about the impact of tariffs while preparing to discuss potential price increases. These tariffs are also expected to influence the resale market, as higher repair costs before reselling vehicles will ultimately lead to increased prices for consumers.
In response to potential impacts, some dealerships and repair shops may stock up on inventory before the tariffs take effect, particularly for high-demand parts. However, stockpiling carries risks for small business owners, especially given uncertainties surrounding the duration of tariff measures.
Insurance Premiums and Tariffs
Insurance premiums are also expected to rise due to the increased costs of repairs related to the tariffs. Bob Passmore of the American Property Casualty Insurance Association predicts that insurance costs will be affected within 12 to 18 months as claims costs increase and new rates are approved. The trade association estimates that auto insurance claims costs could rise between $7 billion and $24 billion annually. Larger insurance providers, such as Allstate, State Farm, Geico, and Progressive, have not responded to inquiries concerning their preparations for potential tariff effects. Mark Friedlander from the Insurance Information Institute noted that the anticipated increase in insurance premiums for 2025 did not account for the impact of tariffs, which could drive costs even higher.
Caldwell explains that tariffs create a "chain reaction" affecting overall ownership costs rather than merely increasing initial purchase prices.
