Car insurance rates are already through the roof, but could tariffs make them even worse? According to Greg Iacurci at CNBC, the answer is yes. The truth is he might be right, but the current car insurance landscape is incredibly complicated, and keeping premiums from rising higher will require multiple interventions by policymakers.

How tariffs could drive up insurance rates

President Donald Trump has proposed a 25% tariff on imported cars and auto parts from Canada and Mexico. If enacted, that tariff alone could drive full-coverage car insurance premiums up 8% to $2,502 per year on average by the end of 2025, according to an analysis by Insurify.

“Tariffs are expected to make cars and auto parts imported from Canada and Mexico … more expensive,” Iacurci writes. That means higher repair costs, so “insurers pay out more money in claims when policyholders get into car accidents.” In turn, those higher costs get passed on to drivers in the form of higher premiums.

This tariff wouldn’t be the first. Trump already imposed a 10% tariff on Chinese imports in February, and his administration has proposed a 25% tariff on aluminum and steel, which could further impact vehicle repair costs. “Motor vehicle insurance premiums are up by 12% in the past year,” Iacurci notes, citing U.S. Bureau of Labor Statistics data.

But not everyone is convinced these tariffs will go into effect. “Economists said they don’t necessarily expect all tariffs to take effect,” Iacurci writes. Even so, just the threat of tariffs is “rattling every corner of the automobile business” and could create ripple effects for consumers.

The real reason car insurance is skyrocketing

Tariffs might raise costs, but let’s not pretend they’re the only problem. Car insurance premiums are projected to rise a total of 20% by the end of this year, and that’s not just because parts are getting more expensive.

As I previously wrote, modern cars are more likely than ever to be totaled after minor accidents. Axios reported that 27% of insurance claims in 2023 resulted in total losses, up from just 19% in 2018. That’s a 42% increase in just five years.

Why? Modern cars are stuffed with tech that needs recalibration after every crash, no matter how minor. “Advanced driver assistance systems—such as lane-departure warning and rear-cross alerts—have to be recalibrated with any accident,” Chris Rice of LexisNexis Risk Solutions told Axios. That makes even simple repairs cost thousands more than they used to.

On top of that, automakers have made repairs harder. Plastic brackets, pre-welded assemblies, and crumple zones designed to fold beyond repair mean insurance companies are writing off more vehicles rather than fixing them. And when an insurance company totals your car, that cost doesn’t just disappear—it raises premiums for everyone.

Yes, the difficulty of getting parts–especially from foreign suppliers–is a factor. Just long shipping times or waiting lists may push insurance companies over the fence of declaring your car a “total loss” if providing your a rental car that whole time is too steep. But its far from the only factor.

Tariffs or no tariffs, drivers are paying the price

Tariffs might make car insurance even more expensive, but they’re just one piece of a much bigger problem. As repair costs rise, insurers are looking for any excuse to pass costs down to drivers. Hopefully, tariffs won’t make things worse. But even if they don’t, insurance premiums are still on track to hit record highs.

If policymakers really want to lower insurance costs, they’ll need to tackle more than just supply chain issues. Otherwise, drivers will keep paying the price—one way or another.