REGIONAL- Few, if any, Minnesotans will likely be celebrating President Donald Trump’s self-declared “Liberation Day” on Wednesday, as tariffs he imposed in a bid to bolster American car manufacturing are expected to drive up the prices on new and used vehicles, car repairs, and auto insurance.
A long-threatened tariff of 25 percent on imported cars and car parts was scheduled to take effect on Wednesday as the Timberjay went to press. When asked over the weekend if he was concerned that the tariffs would increase car prices in the U.S., Trump told NBC News, “I couldn’t care less. I hope they raise their prices, because if they do, people are gonna buy American-made cars. We have plenty.”
Those needing loans to purchase a new car have already been dealing with interest rates that have soared since the COVID pandemic from an average of 4.56 percent for a 60-month loan in February 2020 to 7.53 percent in February 2025. Investopedia reports that average monthly car loan payments are up 26 percent for new cars and 30 percent for used cars over the past five years.
Various analysts estimate that Trump’s tariffs will add anywhere from $4,500 to $20,000 to the cost of a new vehicle, depending on the model and its foreign content. Trump’s steel and aluminum tariffs are projected to add $250-$800 on top of that for gas-powered vehicles and $2,500 or more for electric vehicles, further exacerbating price increases.
The wide variation in estimates is due in part to uncertainty over how the auto tariffs will be applied. Vehicles manufactured under the United States-Mexico-Canada Agreement (USMCA) will reportedly be subject to tariffs only on their non-American content, while vehicles from other countries will have the full tariff applied. So, if a vehicle imported from Mexico has 40 percent of its content coming from U.S. sources, only the 60 percent of Mexican-sourced content would be subject to the tariffs.
The tariff on automotive parts, including engines, transmissions, power train components, and electrical components will be similarly taxed once the government figures out how they will assess those items, which was not expected to be finalized as of Wednesday. The majority of cars manufactured in America have at least 40 percent of their parts sourced from other countries, and virtually none have less than 15 percent foreign components. That means virtually every car made and sold in the U.S. will be affected by Trump’s tariffs in some way.
The increase in new car prices is also expected to have an inflationary effect on the used car market, as drivers are priced out of the new car market. Higher demand for limited stock leads to higher prices, analysts say.
Repairs and insurance
The Minnesota Department of Commerce issued a warning last week that tariffs on vehicle components imported from Canada, Mexico, and China could also significantly increase the cost of car repairs and insurance premiums.
“This is a manmade crisis that will make it more expensive for everyday Minnesotans to drive,” said Commerce Commissioner Grace Arnold in a press release.
Nearly 60 percent of replacement auto parts used in the U.S. come from the three countries facing new tariffs, according to the American Property Casualty Insurance Association (APCIA). When those parts get more expensive, so do the repairs—and that, in turn, drives up insurance claims and premiums.
Auto insurance costs have already climbed significantly in Minnesota. A 2024 analysis by Insurify, an auto insurance comparison company, found that Minnesota had the highest percentage increase of insurance premiums in the country at 58 percent over 2023. The Insurance Federation of Minnesota points to several reasons: more expensive car repairs, rising legal claims, and the increasing number of extreme weather events like hailstorms, which lead to more damage and more claims.
The new tariffs could worsen the trend. The APCIA estimates that personal vehicle insurance claims could jump by as much as $24 billion nationally.
“If insurance companies are paying more to fix or replace vehicles, they may pass those costs on to drivers,” said Arnold.
Higher repair costs mean higher insurance premiums for many Minnesotans, especially when policies come up for renewal—typically every six to 12 months. While the state regulates insurance rates, companies can still file for adjustments if they can show that higher costs are driving the changes.
“Minnesota’s insurance market is competitive, and consumers can often shop around,” Arnold said. “But these tariffs threaten the stability insurance markets rely on to keep rates affordable.”
What you can do
The Department of Commerce urges residents to:
• Review their current auto insurance policy.
• Shop around for competitive rates.
• Factor in potential increases to future budgets.
“Whether it’s commuting to work, dropping kids off at daycare, or getting across town, these tariffs could hit Minnesotans right in the wallet,” Arnold said.