Why US Tariffs May Hamper the Growth of EV Market

US President Donald Trump's tariffs on imported cars and auto parts could stall the growth of the electric vehicle (EV) market, setting back a technology critical to addressing climate change.

- Jack Ewing

But the tariffs could also work in favor of some electric models made in the United States, like the Tesla Model Y or Volkswagen ID.4, that are among the cars with the fewest imported parts and, thus, the least vulnerable to tariffs.

The tariffs could lead to steep increases in the cost of batteries and other components. By hurting electric vehicle manufacturing in the US, the tariffs could also cede more ground to Chinese carmakers that have a substantial lead.

One thing is clear: The tariffs will raise prices for all vehicles—petrol, electric, or hybrid—and could lead to severe parts shortages if some suppliers go out of business. There will be ripple effects that no one can predict. But vehicles that are subjected to lower tariffs could gain a competitive advantage.

Electric vehicles have far fewer parts than cars that run on petrol or diesel. In theory, it should be easier for carmakers to source parts from the US, avoiding tariffs.

Efforts to create a domestic supply chain for electric vehicles are well under way, in part because of Biden administration policies that provided loans and subsidies to battery factories and other projects.