Meet the new trade deal: The U.S. Mexico Canada Agreement is President Donald Trump's replacement for the North American Free Trade Agreement. The agreement requires automakers to produce at least 75% of their cars in North America to avoid import tariffs, up from 62.5%. Also, at least 40% of a vehicle must be produced by workers making a minimum $16 an hour by 2023.
The auto industry seems pleased the deal got done. The alternative was a tax of up to 25% on imported auto parts, which the White House threatened to impose back in July. Representatives from the insurance industry predicted this would increase the cost of auto repair claims and hike auto insurance premiums by $3.4 billion.
So, crisis averted, right? Not so fast.
How car prices are affected
If Congress approves the deal, it means Canada and Mexico won't face those threatened 25% auto tariffs (though they're still stuck with steel and aluminum tariffs). But automakers could still face higher costs from complying with the deal's new regulations, which they'll likely to pass on to customers, Investor's Business Daily reported.
Automakers have long-established supply chains, which are difficult and costly to adjust, Robert Passmore, assistant vice president for personal lines policy for the Property Casualty Insurers Association of America told us in July. Anything that raises the prices of automobiles and automobile parts makes repairs more difficult, which makes insurance more expensive.
There's another catch. This deal only covers three countries. Lots of cars in the U.S. come from Europe and Japan.
While news of this deal may bring them to the table, Trump said Monday he still reserves the right to tariff the rest of the automaking world.
"If we can't make a deal with the European Union, we will respectfully put tariffs on the cars," Trump said.
There are also still unknowns surrounding the trade deal itself. Congress has to approve it — and as we're a month away from the midterm elections, it's not clear when they'll have time to do that. The legislatures of Canada and Mexico have to give the OK as well, so the deal is not quite sealed.
How to lower your auto costs
If you're worried about your car insurance getting hiked because of trade, you can follow some basic advice.
First, shop around. There are a lot of auto insurers and yours isn't necessarily offering you the best deal.
Second, drive safely. You'll be less likely to need costly auto repairs, giving your auto insurer less reason to hike your premiums.
Having the right car matters. We don't mean buy American, since lots of parts for American cars come from abroad anyway, but consider the cost. A new expensive car costs more to insure than a used cheap car.
Want more ways to lower your premium? Try these five ways to save on car insurance in five minutes or less.