The increased costs of construction, appliances and other household items due to new tariffs on imported goods are threatening to raise household insurance premiums by becoming more expensive for insurers to exchange their homes with their contents.
In early April, President Donald Trump imposed a universal 10% tariff on most countries, with the previously announced tariffs high in a 90-day “suspension.” More sharply taxed is being applied for the top three US trading partners. This is the source of China, Canada and Mexico, the majority of the country’s imported construction materials.
Additionally, there are 25% tariffs on steel and aluminum all over the world, which can increase the cost of home construction. For example, most HVAC ducts for homes are made from galvanized steel or aluminum.
Economists and policymakers, including Federal Reserve Chair Jerome Powell, say they expect new import collections to lead to higher inflation as the fee-paying US importers pass the costs. According to the National Association of Home Builders, tariffs will probably add nearly $11,000 to the cost of building a home.
“If the insurance company is on the hook for higher replacement costs, that means the premiums are higher,” says Chris Low, chief economist at FHN Financial in New York.
Tariffs could reheat inflation
It is a recurring dynamic seen after the pandemic when disruptions in the supply chain caused prices to rise, with four years of inflation rising in mid-2022, reaching its lowest level in four years last month. That pre-paid inflation report showed an annual price rise of 2.4%, close to the 2% target set by the Fed.
Duties increase the cost of imported construction materials and also increase the cost of insurers replacing items in the home. China, for example, accounts for almost half of US home appliance imports and about a third of furniture. According to NAHB, Mexico is the source of $500 million worth of imported gas ranges each year.
Low said it’s not the only factor that causes home insurance premiums. The rise in natural disasters such as the wildfires in Los Angeles earlier this year also put pressure on prices to rise. Inflation caused by tariffs will be added to it, he says.
Customs taxes increase construction costs
According to an analysis of 2023 import data by NAHB, roughly 27% of US home construction comes from China, 11% from Mexico and 8% from Canada.
The Trump administration reduced tariffs to 10% in most countries, but there were exceptions after initially setting them much higher.
China saw its tariff rate hike to 145%, but Trump says he now expects it to fall “substantially” while tariffs in Canada and Mexico are at 25% with the exception of some products.
Customs duties aren’t just about raising the prices of imported goods. It also raised prices for domestically made items that rely on tariff metals and other materials, according to a March Bank of America report.
Masco, the parent company of Delta Faucet Co., told customers, according to the report, the company plans to raise the prices of plumbing supplies by 7% to 9% due to tariffs. Show Industries, which manufactures flooring products, says it already hikes around 7% of the price on some items.
“The rapid change in tariffs, which are threatened to raise the prices of many important construction products, said Ken Simonson, chief economist for US related general contractors. “Contractors’ inboxes are bulging with letters from “dear precious customers” announcing a further increase in many products.” ”
Builders are working on price changes
Carl Harris, who builds a home in the town surrounding Wichita, Kansas, says he has received several emails from suppliers who have announced prices increase in recent weeks. He also hears from subcontractors such as plumbers that they can’t guarantee a price estimate of more than 30 days, rather than the six months they used to provide to home builders, Harris says.
“We are being warned by our supply housing and specialized trading partners,” says Harris of the price increases caused by the new tariffs.
Harris says uncertainty around pricing is moving away from custom building projects. Away from custom building projects, it means that customers hire him to build a house at a pre-determined price, to support more “specs” and build a new home and set a price later.
“I don’t know the price of the house until I finish that house,” he says. “Builds take seven to eight months. We don’t just stack all the products on-site and pay in advance, but there’s also the risk of cost escalation.”
When will customs duty increase premiums?
Low said the increased replacement costs caused by tariffs will not immediately affect the premium. That’s because businesses were waiting first to see the impact of economic change and they would have to get a rate hike approved by state regulators. Typically, the delay is about a year, Low says.
Also, since most people have annual policies, Law said consumers will not see changes to premiums until these policies are updated.
“It’ll take some time for the premium to react,” Law says.
According to average rate data from Quadrant Information Services, this increased from $2,116 in April to $2,267 to 7.1% from June 2022.
Economic impact of tariffs
Tariffs increase federal revenues. According to estimates from the Congressional Budget Office, a 10% tariff combined with an additional 50% tariff on goods from China would raise $2.9 trillion for federal finances over the next decade.
Import duties could also reduce consumer spending and slow the US economy. According to Bankrate’s latest economic indicator survey, the probability of a recession the following year was up 36% from 26% at the end of 2024.
“The biggest risks to financial markets and economic activity right now stem from declining consumer and business sentiment and loss of trust in the economy,” says Selma Hepp, Chief Economist at Cotality.
The rising prices of everyday items like groceries will broaden the budgets of American families and make it difficult for homeowners to pay higher premiums, said Thomas Nitzsche, financial educator at Money Management International.
If people aren’t cutting their spending and start increasing their savings, now is the time to do it, he says.
“I want to do whatever I can to reduce financial stress,” Nitzsch says. “That could mean some changes in everyday life — not eating out less and spending a big vacation, not postponing purchases, but the average family can negotiate such changes.”
The US economy shrank 0.3% in the first quarter, according to a government report. Economists usually define a recession as a second consecutive economic contraction.
This month, JPMorgan increased its recession outlook within next year by 60% to 40% due to new tariffs.
JP Morgan’s chief global economist Bruce Kassman said in the report that even if higher tariffs are suspended, “what remains is still enough to push the US and China, and perhaps the global economy into a recession.”
