Plugged in, pulled back: US EV market faces political and trade headwinds

GlobalData Energy

Thu, May 1, 2025, 1:41 PM 7 min read

As the US pushes to reduce its reliance on Chinese-made vehicles, the EV market finds itself at the centre of a deepening trade policy divide. With rising tariffs and a renewed focus on internal combustion engine vehicles, the American EV sector faces mounting headwinds and intensifying global competition.

The Biden and Trump administrations have shared a common objective: reducing the United States’ dependence on foreign-made vehicles, particularly from China, to protect domestic manufacturers and bolster local production. In 2024, the Biden administration imposed a 100% tariff on Chinese EVs and a 25% tariff on lithium-ion EV batteries. The aim was to safeguard US manufacturing while accelerating the decoupling from Chinese supply chains. Biden’s vision was not only about reducing foreign reliance but also ensuring that the US could continue to manufacture EVs at scale.

Biden’s administration set an ambitious goal that 50% of all new vehicles sold in the US by 2030 would be battery electric vehicles (BEVs). To achieve this target, the Biden Administration focused on infrastructure development, allocating US$5 billion under the National Electric Vehicle Infrastructure (NEVI) Formula Program to build a nationwide network of 500,000 high-speed EV charging stations by 2030, but also strengthening the domestic battery manufacturing sector. In September 2024, the US Department of Energy (DoE) announced more than US$3 billion in funding for 25 projects across 14 states, aiming to enhance the production of advanced batteries and battery materials, with recipients including major companies such as Honeywell.

This plan has faced significant setbacks under the new Trump administration. While continuing the decoupling from Chinese supply chains, President Trump recently imposed a 145% tariff on Chinese goods - which includes EV components such as lithium-ion batteries. Unlike his predecessor, Trump has shown little interest in protecting the EV supply chain and the new tariffs are expected to sharply increase the cost of battery cells, drive up EV prices and dampen domestic sales. This is particularly concerning given that China currently holds between 75% and 85% of global lithium-ion battery cell production capacity.

Adding to the uncertainty, China announced in April 2025 that it would restrict exports of seven heavy rare earth elements (REEs), including dysprosium and terbium, which are currently used in many EV motors. With China controlling around 60% of global REE mining and 90% of its processing, the US remains highly exposed in the event of prolonged trade escalation. US-built vehicles rely heavily on international supply chains – Tesla, for example, imports between 20% and 25% of its components from other countries.