US electric vehicle market amid trade and policy uncertainty

GlobalData

Tue, May 6, 2025, 6:09 AM 7 min read

• Both the Biden and Trump administrations have aimed to reduce US reliance on Chinese-made vehicles, but their strategies diverge significantly in terms of supporting the growth of the EV production from US automakers.

• The ongoing US-China trade war is set to negatively impact the US EV market, particularly due to the heavy dependence on Chinese imports like lithium-ion batteries.

• US EV manufacturers already struggle to keep up with cost-competitive Chinese EVs in terms of global sales, but it’s Trump’s broader rollback of EV-friendly policies that poses the biggest threat to future domestic sales.

Both 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. For example, 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 goal, the Biden Administration focused on infrastructure development, allocating $5bn 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 fact, in September 2024, the US DoE announced over $3bn in funding for 25 projects across 14 states, aiming to enhance the production of advanced batteries and battery materials, with awardees including major companies such as Honeywell.

This plan has faced significant setbacks under the new administration. While continuing the decoupling from Chinese supply chains, President Trump recently imposed a 145% tariff on Chinese goods - which include EV components such as lithium-ion batteries. Unlike his predecessor, Trump has shown little interest in protecting the EV supply chain. These 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 houses 75-85% 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, including dysprosium and terbium, which are currently used in many EV motors. With China controlling around 60% of global rare earth elements (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 20% to 25% of its components from other countries.