Tariffs, Trade Wars & Insurance Rates: What California Policyholders Should Know

​In April 2025, President Donald Trump introduced sweeping tariffs: a 25% levy on imported automobiles and auto parts, and a 10% tariff on most other imports. While these "Liberation Day" tariffs aim to boost American manufacturing and correct trade imbalances, they’ve also triggered less obvious consequences, particularly in the insurance world.

Auto Insurance: Premiums on the Rise
The cost of repairing vehicles is climbing, largely due to more expensive imported parts. As a result, insurers are adjusting rates to reflect these rising claim expenses.

According to Investopedia, auto insurance premiums are projected to increase by 6% to 19% by the end of 2025, depending on the vehicle type and reliance on foreign-made components (Investopedia, 2025).
Even used cars aren’t immune. With supply chain issues slowing production and limiting parts availability, the cost to replace vehicles has gone up, impacting insurance valuations and claim costs.

In cities like Los Angeles, where traffic is dense, accident rates are high, and repair costs are elevated, drivers could see increases near the top of that range, particularly if they own vehicles with imported parts.

Homeowners Insurance: The Construction Cost Effect
Tariffs on steel, aluminum, lumber, and other building materials have driven up the cost of home repairs and reconstruction, an expense that directly affects insurance premiums.
Premiums for homeowners insurance may rise 8% to 11% nationwide this year, according to Investopedia (Investopedia, 2025). The National Association of Home Builders estimates that tariffs have already added $10,900 to the average cost of building a new home.

In California, with Los Angeles leading the trend, those increases may be even more pronounced due to higher labor costs, strict building codes, and ongoing wildfire recovery. Older homes or those in high-risk zones may be hit hardest.

Business Insurance: Supply Chain and Builders Risk Pressures
Tariffs have added cost and uncertainty to supply chains, impacting everything from materials to machinery. For California businesses like contractors, manufacturers, and logistics companies, this translates to higher insured values and greater exposure.

Fleet operators are also seeing tighter underwriting and rising maintenance costs, pushing insurers to reevaluate multi-vehicle discounts and terms (Insurance Business Magazine, 2025).

Builders and developers face additional challenges. Higher material prices may necessitate increased limits on Builders Risk Insurance policies, while construction delays can extend policy terms, making coverage more expensive and complicated.

Southern California businesses face added vulnerability due to their reliance on imported goods and proximity to major ports. In response, insurers may raise premiums, narrow coverage, or apply stricter terms at renewal.

Health Insurance: An Indirect Hit
Health insurance isn’t immune either. Many medical devices and pharmaceutical ingredients are sourced overseas, and tariffs could raise costs across the healthcare system.

President Trump's 2025 drug pricing initiatives aim to peg U.S. costs to international benchmarks. While potentially lowering some prices, the shift has drawn criticism from industry leaders who warn it may cut into R&D and slow innovation (Investopedia, 2025).

California’s Insurance Landscape: A Delayed Reaction
California’s regulatory structure doesn’t allow insurers to raise rates immediately, even when their costs spike. Rate changes require state approval, which creates a lag between rising expenses and policy adjustments.

In high-risk regions already struggling with insurer pullbacks, like wildfire zones or coastal areas, that delay can shrink available coverage options. Insurers may limit new business or stop renewing certain policies altogether.

What You Can Do as a Policyholder

• Review Your Coverage: Make sure your home and auto limits reflect today’s rebuilding and repair costs.
  
  
• Talk to an Agent: A knowledgeable advisor can help evaluate your current policies and suggest cost-effective adjustments.
  
  
• Reduce Risk: Consider steps like upgrading your roof, installing leak detectors, or improving business continuity plans. These measures can reduce exposure and help keep premiums manageable.

Conclusion:
The effects of tariffs are rippling through more than just store shelves. They’re showing up in the insurance market, too. In California, where costs are already high and risk exposures unique, those impacts are being felt quickly and sharply.

If you’re unsure whether your policies still offer the right protection, or if you’re paying more than you should, it may be time for a fresh look.

For a personalized policy review, contact Schneiderman Insurance Agency at (818) 322-4744 or visit our website to schedule a consultation.