Incoming Trump administration pushes for tariffs, cutting EV credits

President-elect Donald Trump’s transition team has recommended an aggressive pullback on U.S. electric vehicle subsidies as well as legislation to weaken the auto industry’s reliance on China.

Driving the news: While Trump has long promised to roll back Biden-era subsidies for EVs, a new Reuters report citing transition team documents gives the industry a solid idea of what these changes could look like.

• The group is officially recommending that Trump end the $7,500 EV tax credit and implement tariffs on a variety of EV-related imports, including batteries, minerals and chargers.

• The team is also advocating for redirecting subsidies aimed at building up U.S. charging infrastructure toward creating a domestic supply chain for lithium and other EV battery materials.

• According to Reuters, Trump’s advisors would also raise legal limits for tailpipe emissions, pushing the industry back to 2019-style regulations. This would allow for 25% higher emissions and 15% lower fuel economy than currently allotted for 2025.

• Additionally, the team is pushing to prevent California from setting its own emission standards, although several other states have already adopted similar policies.

Zooming in: While the Biden Administration viewed EVs as an economic issue, the Trump transition team seems to have taken a stance that EVs are a national defense matter.

• The team is especially focused on batteries, with many of its recommendations focused on boosting U.S. supply chains for lithium and other materials while lessening China’s grip on the EV battery sector.

Looking ahead: It is unclear how the industry will react to these policies if the Trump administration takes its transition team’s advice.

• On one hand, most automakers have already invested billions in EV production, with most entering into complicated partnerships in an effort to reduce costs. As such, they are unlikely to abandon electrification regardless of government policy.

• At the same time, raising import costs for battery materials is likely to result in higher prices for cars. While a domestic supply chain could lower production costs, it will take time to build up the related infrastructure.

• If EV prices rise and tax credits end, many consumers are likely to avoid electric cars, especially without an increase in public charging infrastructure.

Bottom line: Although the industry has a clearer vision of what the next administration’s plans to legislate, the coming years are still murky. The success of EVs in the future will likely depend on whether consumers continue to show interest in them without the support of federal incentives.

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