As the United States’ unpredictable tariff situation enters its second week, the impact on car prices worldwide remains uncertain. However, it is clear that the situation is about to become more challenging for electrified vehicles.
Many popular battery-electric and plug-in hybrid models that are assembled outside of the United States will now face new 25 percent tariffs when crossing the border. These tariffs will also affect some American-branded cars, assembled in Canada or Mexico, such as the Chrysler Pacifica PHEV, which is manufactured in Canada, and the Ford Mustang Mach-E and Chevrolet Equinox EV, both built in Mexico.
Conversely, several foreign automakers, including BMW, Kia, and Volkswagen, produce certain battery-powered vehicles in U.S. factories, exempting these models from auto import taxes. For instance, the Hyundai Ioniq 5 and Kia Sportage PHEV are assembled in Georgia.
The situation is further complicated by an additional 25 percent tariff on auto parts set to take effect in early May and country-specific reciprocal tariffs, which will impose a 10 percent fee on goods manufactured outside U.S. borders, potentially increasing in July. Key U.S. auto part imports include aluminum wheels from China, tires from Thailand, and wire harnesses from Vietnam, as reported by consultancy AlixPartners.
Notably, the U.S. has announced that it will impose reciprocal tariffs on goods manufactured in Mexico and Canada, which were previously exempt.
The response of automakers to these new business costs remains unclear. Companies may distribute the import fees across their product lines, increase prices, or absorb the tariffs, potentially seeking assistance from suppliers.
The array of new fees increases uncertainty in the already precarious electric vehicle industry. Several automakers, such as General Motors, Toyota, Ford, and Volvo, had already moderated their ambitious electrification plans before these new tariff announcements disrupted global markets. The future of U.S. EV and PHEV tax credits is uncertain, and consumer interest in electrified vehicles has diminished. Now, the additional tariffs add further financial challenges to the already difficult transition to electric.
Last year, approximately 35 percent of EVs sold in the U.S. were assembled outside the country, according to data from research firm BloombergNEF. Consequently, Japanese and European automakers will primarily bear the burden of these tariffs. For example, Mazda assembles all its EVs outside of North America, and most of Toyota’s vehicles are manufactured outside the U.S. Nearly 90 percent of the 34,000 electric vehicles sold by Mercedes-Benz last year were assembled overseas.
