Trump’s Tariffs Could Send Cost of Car Ownership Skyrocketing

The cost of owning a car—including buying a vehicle, paying for insurance and repairs, and filling up the tank at the gas station—could see a steep increase if President Donald Trump imposes significant tariffs on countries like Canada and Mexico, experts warned.

Newsweek reached out to Trump’s spokesperson via email for comment.

Why It Matters

The overall cost of owning and operating a car, including fuel, maintenance, tires, insurance, license, registration, and taxes, has dramatically surged in the United States in the past few years.

According to data from the Department of Transportation, American drivers spent over $12,000 a year owning and operating their vehicles in 2023. Only two years before, they spent less than $10,000 a year. The 2024 Your Driving Costs study by AAA confirmed an upward trend in the cost of car ownership: last year, the average price of a new vehicle driven 15,000 miles annually was $12,297 a year, or $1,024 a month—up by $115 since last year’s study.

Growing costs are adding a significant financial burden on U.S. households, many of which are already struggling with the higher cost of living.

What To Know

The cost of owning a car in the U.S. is growing because new vehicles have, on average, higher price tags, repairs have become more expensive, and insurance premiums have increased due to costly maintenance and more risky behavior exhibited by drivers at the wheel.

“As cars have become more costly and complex, car ownership has grown increasingly expensive,” Ivan Drury, Edmunds’ director of insights, told Newsweek. Edmunds is an online tool providing information on new and used car inventory.

“In December 2024, the average transaction price (ATP) for new vehicles hit $49,327, which is up 27.6 percent from five years ago at $38,669,” Drury explained. “For consumers who chose to finance their transactions (like most do), the average annual percentage rate (APR) was 6.6 percent in December 2024, compared to 5.4 percent five years ago, which comes out to thousands of additional dollars of interest paid over the life of the loan.”

“This added expense is, unfortunately, just the cost to borrow and doesn’t provide additional utility like buying a more highly optioned vehicle.”

The cost of fuel has also increased from five years ago.

“In December 2024, that checked in at $3.19 compared to $2.65, and while some of this has been mitigated with increased sales of both hybrid and EV vehicle types, these more advanced propulsion types have a higher price point upon purchase,” Drury said.

Experts have warned that the imposition of tariffs on countries like Canada, China and Mexico, which Trump has repeatedly threatened, might exacerbate this ongoing situation, bringing the cost of car ownership even higher.

Higher Price Tags And Costly Repairs

Experts have said that the potential impact of Trump’s tariffs on U.S. car production will vary depending on the complexity of the tariff structure.

“Tariffs on any country that imports cars or car parts are likely to raise the costs of buying and/or repairing cars,” LendingTree writer and licensed insurance expert Rob Bhatt told Newsweek.

“It’s a little too early to tell how much of an impact they will have. Traditionally, tariffs are passed along to consumers in the form of higher prices, but there are only so many costs that the market can bear,” Bhatt said.

“There are a lot of variables at play. The only thing we can say with reasonable certainty is that tariffs probably won’t reduce car ownership costs.”

According to Drury, tariffs on cars made in China won’t have much of an impact on U.S. customers, as only a very small number of vehicles are China-assembled and shipped to the U.S.

“But if the tariffs are on all goods or even auto parts, then there will be increased cost for new cars as well as the cost to replace existing parts,” Drury said.

On a positive note, tariffs on China could help keep low-cost Chinese vehicles from stealing sales of U.S., European and Asian cars in the near term, according to Karl Brauer, executive analyst at iSeeCars.

“But a long-term solution that doesn’t involve tariffs will be difficult because China’s cost structure can’t be replicated by other nations,” he told Newsweek.

“The alignment between the Chinese car industry and China’s government allows them to produce cars for far less than other nations,” Brauer said. “That level of alignment between the U.S. government and automakers is impossible in a Western, capitalist nation with competition and free market forces.”

Tariffs on Mexico or Canada, on the other hand, would immediately impact the U.S. “given that almost every automaker produces vehicles in these countries,” Drury said.

If tariffs increase the price of cars produced in Mexico, “it would cause the price of all vehicles to go up in the U.S.,” according to Brauer.

“Trump knows this, and I suspect he will use the threat of tariffs on Mexico as a negotiating tactic but not put them in place,” he said. “He would risk being criticized for rising car prices, and he doesn’t want to be known for that.”

Pain At The Pump

If the Trump administration imposes tariffs on large oil producers like Canada, “they could absolutely have an impact,” Patrick De Haan, head of petroleum analysis at GasBuddy, told Newsweek.

“Depends on if they become implemented and, if so, for how long. But yes, it’s a significant threat,” he said.

Gas prices skyrocketed during the Biden administration, reaching a peak of $5.016 at the national level in mid-June 2022, partly due to the market disruptions caused by the war in Ukraine. Since then, prices at the pump have come down significantly: as of Wednesday, the national average cost for a gallon of regular gas was $3.120, down from $3.129 a week ago and up from $3.107 a year ago, per AAA data.

“After a couple weeks of slightly fluctuating gas prices, last week saw a slight dip as oil prices fell back to $74 from over $80 in early-mid January after President Biden put new sanctions on ‘dark vessels’ carrying sanctioned crude oil,” De Haan said.

“Trump has also seen some impact on oil prices, due to comments he made about the Saudis potentially raising production to help reduce price, but also worries that tariffs could slow global demand growth.”

But gas prices are likely to rise in the coming months.

“We’ll likely also soon start to see the seasonality—rising demand, refinery maintenance, and switch to summer gasoline—help boost prices through much of the spring,” De Haan said.

There’s a chance that Trump’s policies to increase energy production in the U.S. will bring down the cost of fuel nationwide.

“If the production of oil in the U.S. increases from more drilling and fewer restrictions, it will almost certainly mean a reduction in the cost of oil because the growing supply side of market forces will push prices down,” Brauer said.

However, De Haan doesn’t expect the impact of such policies to be significant on the oil market.

“Oil companies are highly likely to ignore economic conditions to push oil lower, and the coming seasonality is quite strong,” he explained. “Trump is unlikely to be able to significantly soften those forces.”

Surging Insurance Premiums

Car insurance premiums have been rising across the U.S. for the past six years, according to data from LendingTree, and 2025 appears to be bringing another year of rate hikes. Last year, premiums went up by 16.5 percent; this year, it’s expected to reach a record high of $2,101 a year, according to ValuePenguin.com, a LendingTree company.

“There are a few intertwined factors behind these increases,” Bhatt explained. “On the insurance front, we saw a spike in crash rates coming out of the pandemic, and unfortunately, the trend continued as inflation spiked.”

“For most of 2022 and 2023, insurance companies had to repair or replace more cars than normal and spend more than normal to repair or replace each one. After two years of steep rate increases to catch up with these expenses, there are signs that auto insurance rates are stabilizing,” he said.

Crash rates and inflation are normalizing, and LendingTree expects car premiums to increase slower than last year.

“Higher premiums appear to be giving insurance companies enough money to cover their claims expenses again. We may be past the worst of it, barring the unexpected,” Bhatt said.

However, ValuePenguin.com insurance expert Divya Sangameshwar thinks there’s a risk Trump’s tariffs could reverse this trend.

“If Donald Trump goes forward with his plan to impose tariffs on imported goods, insurance rate hikes could speed up again,” she said in a statement accompanying the company’s 2025 State of Auto Insurance study.

“In fact, 60 percent of replacement car parts are imported from other countries like China. Higher costs for parts could mean higher repair prices and more expensive claims, which will result in a bigger rate hike in 2026 and beyond,” she said.

According to Drury, “unless there are countermeasures put in place to reduce the cost or offset” Trump’s tariffs on countries like Canada, China, and Mexico, “the short-term effect will most certainly be an increased cost to U.S. drivers and businesses.”