There’s been a lot in the news recently over tariffs as the Trump administration has begun to put them in place for various countries across the globe. The impact of these tariffs in the short term will probably be higher prices on goods that Americans import from overseas. What caught my attention the other day is an Insurance Journal article stating that tariffs may have an impact on what we pay for car insurance.
Many of the cars we drive are foreign (BMW, Mercedes, Volvo, Honda, Toyota, etc.), and therefore, many of the parts we use to repair a car after a claim have to come from overseas. According to a coalition of car insurance groups, if a tariff of 25% were placed on foreign auto parts, it would increase costs by 2.7%. That may not sound like a lot, but it does add up to $3.4 billion annually. The car insurance companies will pass this cost on to policyholders in the form of higher premiums.
This will impact car and truck owners who drive Fords, Chevys, and Chrysler vehicles too. A lot of the electronics that control fuel consumption, braking, blind spot notification, backup cameras, etc. come from overseas and are assembled in the vehicles here. An interesting fun fact to illustrate the point is the Ford Mustang’s domestic content on the 2017 model is 76%. This means that 24% of the parts and components that go into the Mustang comprises 24% come from other countries including the manual transmissions which come from China and Mexico.
Car insurance execs warn that enacting tariffs could also lead to delays in getting parts to repair vehicles. These delays can also increase costs associated with claim repairs. If parts become too difficult to obtain, shortages may lead to higher incidents of part theft from vehicles and vehicle thefts where cars are stripped of parts and sold in the marketplace.
Most of us would never have associated tariffs resulting in increased car insurance premiums, but they can and will if these are enacted. Regardless of your political perspective, you must admit, that in the short run, we will all pay more for most of what we buy due to tariffs. What do you think? Share your comments, questions, and perspectives with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!