Tariffs on uncooked supplies like metal and aluminum have the potential to extend repairable claims prices on either side of the border, says Ryan Mandell, director of claims efficiency at Mitchell, an Enlyte Firm.
Canadian carriers might see these prices rise by roughly 1% or 2% as soon as they go into impact, Mandell instructed Canadian Underwriter in a press release.
On Feb. 10 and 11, 2025, U.S. President Donald Trump signed two govt orders that may impose a 25% tariff on imports of steel and aluminum products from all international locations, together with Canada, beginning Mar. 12, 2025.
A number of unique gear producers (OEMs) — Normal Motors, Ford, Stellantis, Toyota and Honda, to call a couple of — have manufacturing operations in Canada, which might assist insulate them from tariff publicity.
Nonetheless, about 62% of the automotive components imported into Canada come from the U.S. As well as, the U.S. will get 25% of its metal and 68% of its aluminum from exterior of the nation, Mandell says.
Predictably, these tariffs will drive parts costs higher, he mentioned in a Mitchell webinar Thursday.
Car values additionally face tariff uncertainty.
When forecasting what automobile values might appear to be six months from now, “we’re nonetheless about 13% inflated in Canada above the place we’d usually anticipate these automobile values to be [pre-COVID],” Mandell says.
“Nonetheless, tariffs have actually thrown a wrench into these projections,” he says. “The fact of uncooked materials tariffs, proper now, is unquestionably one thing that’s trigger for concern from each a complete automobile facet and from a components standpoint.”
A few yr to a yr and a half in the past, automobile values began to say no in North America. And whereas they’re nonetheless declining in Canada, the U.S. is seeing indicators of stabilization.
“What we regularly see is that the U.S. can signify a harbinger of what we will anticipate to return in Canada, and it’s normally about six to 9 months forward of time,” Mandell says. “So, what we’re seeing within the U.S. proper now could be values began coming down roughly about six to 9 months sooner than they did in Canada.
“Seeking to among the information that we see within the U.S. could be a means to assist forecast among the traits that you simply may see in Canada.”
On the identical time, complete loss frequency is growing, as a result of autos are costlier to restore than earlier than.
What meaning for automobile purchases
Mandell introduced the webinar on Feb. 27, the day Trump reaffirmed tariffs on goods would proceed on Mar. 4. The newest on metal and aluminum tariffs is that they’ll proceed Mar. 12.
Not surprisingly, the price of shopping for a brand new automobile will enhance, which suggests drivers available on the market for a brand new automobile could look to purchase a used automobile as a substitute.
TD economists estimate that common U.S. retail prices for cars could increase by US$3,000.
“Once we take a look at the entire automobile facet, there’s been loads of estimates thrown [around] about what these tariffs will do to the price of autos,” Mandell says. “No shock, it’s going to extend that value.
“That may naturally drive extra demand for used autos and can upend the pattern of declines that we’ve seen during the last yr and a half,” Mandell says. “So, we do anticipate that values will begin to flatten out and really most likely begin to go up as these tariffs work their means by means of that manufacturing course of.”
The availability chain influence on components stemming from tariffs can also be extremely sophisticated.
“And since there’s loads of totally different parts of that automobile that may be affected by these tariffs, a number of parts may be tariffed a number of instances,” he says. “In the event that they’re crossing totally different borders, typically components shall be produced in a single nation, introduced again into one other for last meeting, after which crossed the identical border once more to return for distribution and supply. It’s a really complicated provide chain at play right here.”
In fact, there may be variability in what might occur when and if tariffs hit.
“That is us making an attempt to realize some kind of understanding about what this might probably imply for Canadian insurers and the price of restore,” Mandell says.
Function picture by iStock.com/RainerPlendl
