First it was higher tariffs on imported cars and parts. Then it was rising duties on steel and aluminum. Alongside those came escalating tariffs on China and its counterthreat to cut off supplies. Next up are critical minerals and semiconductors.
Amid the confusion of President Donald Trump’s tariffs, experts say one thing is clear: Each measure will make electric vehicles less affordable and likely slow their arrival to the American mainstream.
While cars of all kinds could get costlier with tariffs, those that run on batteries face more price challenges. Tariffs are highest on China, which automakers and suppliers can’t yet escape as a key source of crucial battery materials. Trade war developments “have put EV manufacturers in a uniquely difficult position,” said Ram Chandrasekaran, an EV analyst at FTI Consulting. “Many will struggle to offset these pressures without eroding already thin margins.”
Among the sufferers are new members of the American battery supply chain. Even as they make tariff-free materials domestically, they rely on equipment and chemicals from China, South Korea and Europe. Deals are on hold as everyone waits for clarity on presidential tariff decrees that shift by the day and week.
“The questions grow and grow, and it is creating immense uncertainty,” said Emma Bishop, a vice president at the Battery Materials and Technology Coalition, a trade group of American battery manufacturers.
Not that the young EV supply chain isn’t notching a few wins these days.
Hyundai officially opened its huge new EV factory in Georgia last month. Last week, the startup Sila began commissioning its first factory in Washington state to make silicon anodes, a new kind of battery component where China has no advantage. And Lyten, a maker of lithium-sulfur batteries, said it had bootstrapped enough domestic supplies to have a “tariff-free battery.”
Nonetheless, tariffs will create broad upward pressure on prices, which have long been higher for EVs — one of the main reasons potential buyers cite for holding off. Traditional cars are cheaper because they have had a century to achieve efficient production.
The average EV cost almost $12,000 more than the average traditional vehicle last month, according to data from Kelley Blue Book, which tracks vehicle pricing. The gulf is widening. Between February and March, the average transaction price for an EV rose by almost $2,000, while average pricing for standard cars stayed flat.
Rat-a-tat rattles the market
The thick-and-fast barrage of tariffs that Trump has introduced in his first months in office include:
- A 25 percent duty on imported cars.
- A 25 percent markup on auto parts, which is due to take effect May 3 but that Trump has talked of altering.
- A 25 percent tariff on foreign aluminum and steel.
- A range of reciprocal tariffs that Trump imposed and then paused for 90 days.
- Chinese tariffs that now amount to 145 percent.
And the administration is not done.
Last week, Trump launched a far-reaching probe into all mineral imports coming into the U.S., as well as finished products — such as EVs, batteries and wind turbines — to determine whether steeper tariffs are necessary. And the Commerce Department started an investigation on semiconductors, which could result in additional tariffs.
China has responded by imposing export controls on rare-earth elements, of which it controls most of the world’s supply. Some of those materials, like neodymium and dysprosium, are essential to the electric motors that make EVs move.
The sheer range of duties could cause far-ranging changes to the economics of EV production.
For example, U.S. automakers import many battery materials from South Korea, via suppliers like SK On and LG Chem, which face the global 10 percent tariff — and the possibility of a far higher 25 percent duty after Trump’s reciprocal tariffs resume in July.
Then there’s finished vehicles that are made in Mexico and Canada, where Detroit’s automakers feel a particular pinch.
Mexico is where General Motors makes its new electric Equinox and Blazer and where Ford makes its Mustang Mach-E. All of those vehicles are intended as middle-market, affordable EVs. Stellantis, the European conglomerate that owns American brands, makes the electric Jeep Wagoneer S in Mexico and the Dodge Charger Daytona EV in Canada. Stellantis has paused production of both as it sifts through tariff impacts.
A new tariff on semiconductors would hit all cars, which use more computer chips as they become more technologically sophisticated.
EVs use fewer chips than internal-combustion-engine cars, said Chandrasekaran. However, the ones EVs use are the most sophisticated and sought after — the very kind that were in short supply during the pandemic, causing auto supply-chain breakdowns that drastically raised the price of new vehicles.
Which of these many barriers will have the biggest effect on EVs?
“All of the above,” said Sam Abuelsamid, an auto market researcher at the consultancy Telemetry. “It’s hard to say for sure which is going to have the biggest obstacles.”
Blow or ‘blip’?
At the New York International Auto Show last week, a panel of experts assembled by the publication Automotive News could find nothing positive to say about the U.S. auto industry’s outlook for the year under the new tariff regime.
They foresaw higher vehicle prices, fewer consumers ready to buy, declining choices as some automakers remove their imported models from the market and lower automaker profits.
“It’s really kind of tough all the way around,” said Stephanie Brinley, an auto analyst at S&P Global.
She mentioned that last week S&P severely downgraded its forecast for the U.S. auto market, projecting 700,000 fewer car sales this year. The only comparable recent downward projections from S&P were the Great Recession in 2009 and the onset of the pandemic in 2020.
She added that on prices, EVs “might end up indexing a little bit high just because of the supply chain surrounding them.”
There’s no route out of tariffs that won’t increase the cost to build cars. But exactly how much automakers will absorb and how much prices will climb isn’t yet clear, according to Rho Motion, a United Kingdom-based EV and battery information services company.
What’s also unclear is whether tariffs or restrictions on exports and imports will change and by how much given the shifting political landscape, the firm said.
The tariff shocks come as other supports for the EV ecosystem are wobbling.
Republicans in Congress are trying to roll back key programs for the electric vehicle sector as part of plans to find ways to pay for a tax cut. Chief among them is the $7,500 EV tax credit, which has stimulated EV sales by counteracting the vehicles’ higher prices.
They are also trying to kill a waiver from EPA that allows California and other cooperating states to mandate high levels of EV sales in the coming years.
There are some tariff optimists.
Republican Bernie Moreno, a new U.S. senator from Ohio and longtime car dealer, told a crowd at the New York auto show that the tariffs would usher in a new golden age of manufacturing and would be forgotten by next year.
They “will be a blip,” he said.
The China cost challenge
The EV’s most crucial dollar challenges involve China because of a double dynamic of tariffs and export controls.
“Together, they target the core of global EV production: rare earth elements and battery material processing, both of which are heavily concentrated in China,” Chandrasekaran said.
The tariffs are threatening to raise the costs of minerals used to build equipment like lithium-ion batteries and other equipment coming into the U.S. The materials from China that matter most are battery cells; cathode-active materials; and raw inputs like graphite, lithium, cobalt and nickel.
Today, 69 percent of all U.S. imports of lithium-ion batteries come from China, according to the Center for Strategic and International Studies, a Washington think tank. China currently dominates the processing of critical minerals and rare earth elements that are tied to EV supply chains. Graphite, for example, makes up the largest part of an EV battery, and China is currently the top producer and exporter, refining more than 90 percent of the graphite around the world.
China’s export controls are different. While tariffs usually don’t discriminate among importers, export controls can be highly targeted to the product’s users. China could use its export controls to shut off or throttle supplies to U.S. defense or industrial companies, both of which are highly dependent on rare earths.
Rare earth magnets are far more powerful than traditional iron magnets and are used to make more efficient and smaller motors, including in many EVs. Ninety percent of them come from China, Telemetry’s Abuelsamid said.
The impact is not limited to EVs.
Gracelin Baskaran, director of the Critical Minerals Security Program at CSIS, pointed to China’s move late last year to restrict exports of antimony, a silvery-white metal that General Motors uses to harden the chassis or structural backbone of the cars it builds. Permanent-magnet motors are used in power windows, power seats, power steering and the fuel pumps in traditional cars.
“Those motors will get more expensive,” said Abuelsamid.
“In the near term, [the export controls] may be a bigger risk than the tariffs,” Abuelsamid continued. “At least with tariffs, you know the cost.” If China chokes off rare earth materials, “there’s a whole plethora of things you can no longer manufacture.”
Automakers have rare earth minerals and magnets stockpiled — a practice that became common during the supply shocks of the pandemic and amid rising tension with China. Eventually, automakers could find other sources of supply or ways to do without rare earths altogether. But that would take years.
“That is a frontier that has been thought about, but the money hasn’t followed the thought,” said Neal Ganguli, an auto analyst at the business advisory firm AlixPartners.
A crucial conversation
Rising costs for EVs aren’t preordained, especially if negotiations create a tariff breakthrough between the U.S. and China.
Scott Kennedy, a senior scholar on Chinese business and politics at CSIS, said it’s possible the two nations could reach a deal in the coming months if both sides feel enough financial pain, from shortages of rare earths and minerals and other materials to companies cutting jobs.
“If the U.S. looks like it’s tipping into a recession, that’s going to [prompt] the Trump administration to be ready for dialogue,” said Kennedy.
On the Chinese side, Kennedy said he’s watching to see if China’s economy suffers as challenges around overcapacity grow amid the trade war. Those challenges, he said, stem from China producing a surplus of minerals and other products, building up inventories and then offloading that product into the global markets. He noted that European countries and those in Latin America have already moved to impose restrictions because of the growth in Chinese exports.
“It’s going to take a couple months for those effects to … occur and to be visible,” said Kennedy. “But I expect that’s the path of breadcrumbs that we need to follow to the negotiating table.”
