President Donald Trump’s tariff policies are significantly impacting the costs of electric vehicles (EVs) and traditional combustion cars. The tariffs, particularly those targeting China—a major exporter of critical metals and rare earth elements—have left the auto industry vulnerable, according to Anne Clawson, co-founder of Cascade Advisory. She highlights that every automotive component could be affected differently, with the overall implications on vehicle affordability and availability a major concern for both manufacturers and consumers.
The policies include a 25% tariff on all foreign-made vehicles and parts, alongside a staggering 50% tariff on steel imports, which directly influences car manufacturing. China’s position of strength in critical minerals, which are essential for vehicle production, complicates negotiation and supply chain dynamics. As these tariffs stabilize, the auto industry anticipates fluctuations in EV pricing due to their heavy reliance on rare earth materials, which are not only found in EVs but also conventional vehicles. Clawson notes that the current uncertainties hinder automakers’ capacity to strategically navigate tariff impacts.
The implications of these tariffs extend beyond vehicle prices to include overall vehicle availability. Steel tariffs significantly contribute to rising production costs since steel is a fundamental component of vehicles. Meanwhile, the less visible market for rare earth metals such as lithium, crucial for EV batteries, complicates companies’ risk management, making it challenging to forecast and mitigate operational costs. This uncertainty culminates in inevitable price increases for consumers, with automotive expert Clawson predicting an upward trajectory in vehicle pricing that might stabilize by the production of 2027 models.
Moreover, the tariffs have galvanized a renewed interest in domestic mining and production initiatives for critical materials. As the auto industry seeks to lessen its dependence on imports, companies like USA Rare Earth aim to create a robust domestic supply chain for essential elements used in EV production. The ongoing trade tensions and export restrictions could ultimately drive forward-thinking supply chain adaptations in the industry, fostering increased domestic mineral availability to counteract tariff impacts.
For potential car buyers, the outlook remains cautious. Kelly Blue Book reports an average markup of $6,000 on vehicles under $40,000, though not all models will face equal tariff burdens. Consumers are advised to strategically select which vehicles to purchase, factoring in existing inventory and diversifying their options. Shoppers might consider more budget-friendly models or even used vehicles, as well as leasing options to mitigate the financial strain associated with new purchases driven up by tariffs.
As vehicle prices ascend due to tariffs, various ownership costs—including financing taxes and insurance—are projected to rise as well, further straining budgets. While demand for both new and used cars may increase, the ripple effects of these tariffs on the overall auto market will likely exacerbate pricing challenges. Therefore, shoppers must be vigilant and adaptive when navigating this evolving landscape, seeking the best options within their financial means while anticipating ongoing changes in the market.
