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While discussion of the recent tariffs implemented by President Donald Trump has largely centered around the potential rise of prices for tangible consumer goods, the insurance world has other additional considerations at play. In no small margin, the insurance industry specifically will be closely monitoring the development, implementation, and execution of those tariffs and how they affect internal risk calculations that could create ripple effects in insurance companies’ future decision-making and insureds’ coverage options.

For background, on April 2, 2025—deemed “Liberation Day” by President Trump—the President issued a comprehensive Executive Order declaring that current “asymmetric” international bilateral trade relationships between the United States and other countries constituted “…an unusual and extraordinary threat to the national security and economy of the United States.” Per this declaration, the President continued on to declare a national emergency with respect to those trade conditions, invoking the International Emergency Economic Powers Act of 1977--among other legislation--as grounds for his exercise of economic powers such as the enactment of duties, taxes, and other financial vehicles that would normally be the purview of Congress. The plan was generally outlined to implement a new ad valorem duty of 10% on all imported goods from the United States’ trading partners, starting on April 5, 2025 and to apply until such time the President determines the declared national emergency is “…satisfied, resolved, or mitigated.” The new duty would be in addition to pre-existing duties imposed on countries (with particular attention to changes or conditions in Canada and Mexico’s tariff structures, for example, as attributable to illicit incoming cross-border drug activity).

On the same date, President Trump issued Executive Order No. 14256, an amendment designed to address “…the synthetic opioid supply chain in the People’s Republic of China,” (“PRC”) who was already being tariffed by previous Orders. This Amendment contained additional specific provisions applicable to the PRC, implementing a new 30% ad valorem duty on their goods imported into the United States; it also eliminated “de minimis” tariff treatments addressed in the President’s previous Orders (initially a duty of 10%, progressively raised in later Amendments to 20%, and then 30%) . On April 8, 2025, however, President Trump again changed tariff rates on the PRC in a new Executive Order, raising the ad valorem duty amounts on their imports from 30% to 90%. He also modified the Harmonized Tariff Schedule of the United States (“HTSUS”) to additionally raise tariffs under its provisions from 34% to 84%.

In a reversal to his tariff policies as issued 24 hours before, however, on April 9, 2025 President Trump issued a “temporary susp[ension]” of the previous HTSUS increases as to all countries other than the PRC,” again by Executive Order. The Order also suspended “country-specific” ad valorem duty rates, with exception as to those applicable to the PRC. Instead, the Order specifically amended the HTSUS again, this time increasing tariffs applicable to the PRC to 125%. Moreover, it also raised the ad valorem “de minimis” tariffs applicable to the PRC to 120% (up from the 90% of the April 2nd Order). Finally, on April 11, 2025, President Trump announced another change to the sweeping tariff policies, issuing a Memorandum clarifying that one excepted product from the tariffs of Executive Order 14257 is the importation into the United States of “semiconductors,” defined elsewhere in the HTSUS to include--among other items--smartphones, solid-state non-volatile storage devices, flat panel display modules, and other monitors.

In case all of that activity was not enough to keep businesses on their toes, all of the changing policies overlay other industry-specific tariffs recently ordered by President Trump, including a new 25% tariff on all automobiles and automobile parts that are not “…obtained, produced entirely, or substantially transformed…” in the United States. As another example, in the building industry, the President announced reinstatement of a full 25% tariff on steel imports and an increase on tariffs on aluminum imports up to 25% pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. § 1862).

Clearly, the message to American consumers and the business world is that with respect to tariffs, stay tuned. So, how do all of these developments apply specifically to the insurance industry, especially given the Orders’ concentration and focus on imported goods? The risk of loss overall to insurers’ customers is subject to the ebb and flow of trade markets, changing legislation, and economic conditions at large. Behind the closed doors of “Insurance, Inc.,” forecasting and prediction are the tools of the trade and risk transfer and loss amounts impact how insurers underwrite, price, and deliver coverage. The changing landscape of tariffs, however, has been anything but predictable.

As such, considering this volatility, industry leaders indicate that auto insurance rates are predicted to reflect significant changes due to increased vehicle and vehicle component costs, and increased repair costs to those higher-priced vehicles. Those increased costs will result in higher claim costs to insurers, which will be passed along to insureds in their premiums to protect insurers’ capital and underwriting base. Increased construction costs on materials such as steel and aluminum will almost certainly drive up the cost of both home and commercial construction and repairs. Insurers will--in order to properly insure a home in line with the elevated costs—need to both increase coverage limits as well as their companion reflective premiums. Industry credit ratings analyst and data analytics provider AM Best summarized these issues recently, stating that “…given the supply chains that the U.S. auto industry has established…any disruptions and inflationary impacts due to the tariffs will be a credit negative for carriers.” The rating agency also noted that construction replacement costs will increase “beyond expectations,” with the tariffs overall creating “…global economic uncertainty as retaliatory and reciprocal measures are implemented.” This uncertainty and the increased claim costs to insurers could also reduce their underwriting capacity, particularly in lines with historically low margins like renters’ risk, builders’ risk, and high-risk commercial auto policies.

In summary, there is no doubt that 2025 will present a challenge to businesses across the board in determining their strategies for handling the changes brought on by new tariff policies. For insurance companies who are no strangers to risk, however, this changing landscape may prove to be the riskiest test they have faced yet.