Tariff Watch: What Tariffs Have Done to the Electric Vehicle Market

One car, four ports

Picture a compact electric hatchback built in China with a customs value of $20,000, arriving at four ports on the same October morning in 2026. At Long Beach it owes the 2.5% base US car duty, the 100% Section 301 tariff on Chinese EVs and the 25% Section 232 tariff on imported cars, which on our estimate comes to $25,500 in duties before freight. At Antwerp, if BYD built it, it owes the EU's 10% car duty plus a 17.0% countervailing duty, about €5,400 on a €20,000 customs value. In Toronto, inside Canada's new quota, it pays 6.1%, or about C$1,220, and at Veracruz it pays Mexico's new 50% rate, or $10,000.

Those four numbers tell most of the story of what tariffs have done to the electric vehicle market since September 2024. The same product now carries four very different price tags depending on where it lands, and every automaker, battery maker and investor in clean transport is planning around that spread. This issue walks through the US stack layer by layer, shows how landed cost is built, totals what the bill has looked like in company filings, and follows how Chinese makers and Western suppliers have moved their factories in response. We close with history, because none of this is new, and with the moves we would make now.

The US stack, layer by layer

The base layer for Chinese clean technology is Section 301. After its four-year review, USTR announced on 13 September 2024 that tariffs on Chinese EVs would rise to 100%, and on lithium-ion EV batteries, battery parts, other critical minerals and steel and aluminum products to 25%, all from 27 September 2024. A second step took effect on 1 January 2026, when non-EV lithium-ion batteries, natural graphite and permanent magnets also moved to 25%, according to Thomson Reuters' summary of the final action (25 September 2024). Separately, the Commerce Department's connected vehicle rule of 14 January 2025 bars Chinese and Russian software from model year 2027 and hardware from model year 2030, and Automotive Logistics reported in April 2026 that the current administration has kept it.

The second layer is Section 232, which covers every origin. A 25% tariff on imported cars took effect on 3 April 2025 and on many parts on 3 May 2025, as AP reported in July 2025, and Covington's April 2026 review confirms the 25% rate remains, with country deals and an offset program for US assemblers. Japan's rate fell to 15% on 16 September 2025 under its trade deal, according to the Qatar Tribune (17 September 2025), and the EU also sits at 15% under its 2025 deal, per Automotive Logistics, which reported a May 2026 threat to raise that rate to 25%. Medium and heavy trucks and their parts have paid 25% and buses 10% since 1 November 2025, with a truck parts offset of 3.75% of US-assembled truck value through 31 October 2030, per Sandler, Travis and Rosenberg (21 October 2025). Steel and aluminum rose to 50% in June 2025, and an April 2026 overhaul kept 50% on metal articles while setting 25% to 50% on derivatives, per Thompson Hine (June 2025) and Covington (23 April 2026).

The third layer moved the most in 2026. On 20 February 2026 the Supreme Court ruled 6 to 3 in Learning Resources v. Trump that the International Emergency Economic Powers Act does not authorize tariffs, according to the American Bar Association and Automotive Logistics. A 10% Section 122 surcharge ran from 24 February to 24 July 2026 and exempted passenger vehicles, certain light, medium and heavy trucks, buses and certain parts, and CBP opened a refund portal on 20 April 2026 with more than $160 billion expected to flow back to about 330,000 importers, per Automotive Logistics. On 24 July 2026 a new Section 301 action on forced labor replaced it: China pays 12.5% on top of the base duty, goods already under Section 232 are excluded, and existing China Section 301 duties still stack, per Greenberg Traurig (24 July 2026).

Two details in that July action matter for this market. SMM reported on 24 July 2026 that lithium-ion batteries under HTS 8507.60.00, plus lithium carbonate, lithium hydroxide and several nickel and cobalt inputs, are exempt from the new 12.5%. USTR has also said it will report on a separate Section 301 investigation into structural excess capacity, which Greenberg Traurig flags as a possible further increase. On critical minerals, Proclamation 11001 of 14 January 2026 chose negotiation over an immediate Section 232 tariff, per Thompson Hine (January 2026).

How landed cost is actually built

Landed cost starts with classification and origin, because each layer keys off the tariff code and the country where the good was substantially made. In the US the duty base is generally the transaction value of the goods, while the EU adds freight and insurance to its border, so the same car carries a larger base in Antwerp. Each ad valorem layer is then multiplied against that base and added, unless a stacking rule says otherwise. Executive Order 14289 lists the measures that do not stack with the auto tariffs, namely the Canada and Mexico emergency tariffs and the steel and aluminum duties, per C.H. Robinson (21 May 2025), and China's Section 301 duties are absent from that list.

Here is our estimate for the Chinese-built car at Long Beach, using the rates above. Every line is an estimate built from published rates, and a broker's classification ruling would settle the final figure:

1. Customs value: $20,000.
2. Base duty at 2.5%: $500.
3. Section 301 at 100%: $20,000.
4. Section 232 at 25%: $5,000.
5. Estimated duty: $25,500, or 127.5% of customs value, before ocean freight, insurance, port charges, US certification and dealer margin.

The battery case shows why the stack matters more for storage than for cars. A CBP ruling of 21 August 2025 (N351928) put Chinese lithium-ion batteries under HTS 8507.60.0020 at a 3.4% base duty with a 7.5% Section 301 duty at that date. From 1 January 2026 the Section 301 rate on non-EV lithium-ion batteries is 25%, and SMM reports the July 2026 forced-labor tariff exempts this code. Our estimate for a $1,000,000 shipment of Chinese storage batteries is therefore $34,000 in base duty plus $250,000 in Section 301 duty, or $284,000 in total, a 28.4% stack that buyers should confirm against the Federal Register annexes before relying on it.

The same method gives the other ports. In the EU, the countervailing duty applies on top of the 10% car duty, so a BYD car pays 27% and a model at the 20.7% rate for cooperating companies pays 30.7%, per the European Commission (12 December 2024) and CnEVPost (11 February 2026). In Canada, a Chinese EV inside the quota pays 6.1%, the 100% surtax schedule was repealed when the quota opened, and once the annual quota is used no further import permits are issued, per Cole International. In Mexico, a Chinese passenger car pays 50% from 1 January 2026, per White & Case (29 December 2025).

What the bill looks like at the automakers

The 100% rate kept Chinese EVs almost entirely out of the US, so the tariff layer that shows up in automaker filings is Section 232. Those duties fall on cars and parts flowing from Japan, Korea, Mexico, Canada and Europe into US showrooms and assembly plants. General Motors reported $3.1 billion in gross tariff costs for 2025, below its earlier $3.5 billion to $4.5 billion forecast, and guided to $3 billion to $4 billion for 2026, per Zacks on Nasdaq (16 February 2026). Quartz reported on 27 January 2026 that GM offset about 40% of the impact through pricing and cost moves, and Bloomberg Law reported on 21 July 2026 that GM raised its 2026 outlook to as much as $16 billion in earnings before interest and taxes, helped in part by lower tariff costs.

Ford's tariff costs reached about $2 billion in 2025, including a $900 million year-end charge after the administration told the company on 23 December that a parts offset would apply only from November, per Bloomberg Law (11 February 2026). Ford expects about $2 billion again in 2026, per the same report. Hyundai Motor disclosed 4.1 trillion won in US tariff costs for 2025 in a filing on 29 January 2026, as operating profit fell 19.5% to 11.47 trillion won, per the Korea Times.

Toyota's numbers are the starkest. The company put the tariff impact at 1.4 trillion yen for the fiscal year ended 31 March 2026, and its North American operations posted a $1.9 billion operating loss, the first loss there in 16 years, per WardsAuto (11 May 2026). Each of these companies builds heavily in the United States already, which tells us the Section 232 layer taxes the parts and finished vehicles that cross borders inside established supply chains. For a company building EVs, that layer touches motors, cells, wiring and steel even when final assembly is local.

Europe, Canada and Mexico draw their own lines

Europe chose a narrower tool. Its definitive countervailing duties on Chinese battery electric cars apply from 30 October 2024 for five years, at 17.0% for BYD, 18.8% for Geely, 35.3% for SAIC, 7.8% for Tesla's Shanghai plant, 20.7% for other cooperating companies and 35.3% for the rest, per the European Commission (12 December 2024). On 12 January 2026 the Commission published guidance on price undertakings, which let an exporter offer a minimum import price per model, volume limits and verifiable EU investment in exchange for relief, per CMS (9 March 2026). On 10 February 2026 it accepted the first one, from Volkswagen (Anhui) and SEAT for the Cupra Tavascan, with a minimum price, an import cap and investment milestones, and a breach may lead the Commission to withdraw the undertaking and collect duties retroactively, per the European Commission.

The EU duty covers battery electric cars only, and Chinese makers moved into the gap. The Next Web reported on 11 September 2026 that Chinese brands held 10.9% of European registrations in June 2026, citing Dataforce, and 28% of the European plug-in hybrid market in the first half. The same report said the Commission has been preparing duties on Chinese plug-in hybrids since June, citing Handelsblatt, though none have been imposed. The IEA's Global EV Outlook 2026 counts more than 900,000 electric car imports into the EU in 2025, with China supplying almost 60%.

Canada matched the US in 2024 and then opened a door. Its 100% surtax on Chinese EVs took effect on 1 October 2024, per EY, and on 16 January 2026 Prime Minister Mark Carney agreed with Beijing to admit up to 49,000 Chinese electric vehicles a year at the 6.1% rate, per Al Jazeera. The quota opened on 1 March 2026 in two windows of 24,500, and from its second year a rising share of imports must carry a free-on-board price of C$35,000 or less, starting at 10% and reaching 50% in year five, per Drive Tesla Canada (17 March 2026). Washington's reply came under the same 1930 statute this issue returns to later: three proclamations of 20 July 2026 under Section 338 of the Tariff Act of 1930 imposed 50% duties on Canadian goods, citing Canada's dairy quota rules, provincial bans on US alcohol and its 25% surtax on US-built vehicles, per PwC Canada, and those duties took effect on 22 August, with a revised product scope in force from 15 September 2026, per Thomson Reuters (10 September 2026).

Mexico raised its wall from the other side. A law published on 29 December 2025 set duties on 1,463 tariff lines from countries without a trade agreement with Mexico from 1 January 2026, including 50% on finished passenger vehicles and 7% to 36% on many parts, per White & Case. China, India, South Korea, Thailand and Brazil are among the affected origins. On our reading, the effect is a North American perimeter that Chinese finished vehicles reach mainly through Canada's quota.

How Chinese makers answered

The first answer was volume to every market still open. China exported 7.1 million vehicles in 2025, up 21.1%, including 2.615 million new energy vehicles, and 3.13 million in the first four months of 2026, up 61.5%, according to CAAM data reported by CnEVPost (13 May 2026). The IEA found that Chinese automakers supplied 60% of global electric car sales in 2025, and that 2025 exports exceeded overseas sales by more than 25%, which points to inventory building abroad. Southeast Asia and Latin America absorbed much of that growth, with Southeast Asian electric car sales more than doubling in 2025, per the IEA.

The second answer was to build inside the walls. BYD's plant in Rayong, Thailand opened in July 2024 with 150,000 units of annual capacity and built its 100,000th vehicle on 21 September 2026, and it shipped more than 900 Dolphins to Europe in August 2025, per CnEVPost (23 September 2026). BYD's Camaçari plant in Brazil began operating on 1 July 2025, built its 100,000th vehicle on 16 July 2026 and holds export orders for 50,000 vehicles each to Argentina and Mexico, per CarNewsChina (18 July 2026). In Europe, Leapmotor's B10 entered production at Stellantis' Zaragoza plant in Spain in October 2026, per CnEVPost (13 October 2026), and Chery said in February 2026 it would begin production in Spain that year after delays, per TimesLive.

Factories inside a wall take longer than tariffs do. BYD's Szeged plant in Hungary began trial production in February 2026, and as of June the company targeted series production in the fourth quarter of 2026, about ten months behind its original end of 2025 plan, per electrive (11 June 2026). The same report said BYD's planned $1 billion car plant in Manisa, Turkey is on hold with no production timeline, while the company looks for an existing plant in southern Europe. The pattern is consistent across markets: tariffs set the destination, and the build schedule sets how fast the company gets there.

Prices, batteries and the supply chain at home

US EV prices have held steady while volumes fell. Kelley Blue Book put the average EV transaction price at $55,879 in September 2026, 3% lower than a year earlier, with incentives at about 11% of price against 14.2% a year before, per Cox Automotive (13 October 2026). Cox counted 247,226 EV sales in the second quarter of 2026, down 20.5% from a year earlier, after a record 438,487 in the third quarter of 2025, when buyers rushed ahead of the 30 September 2025 end of federal tax credits. Tariffs are one force among several here, and the clearest effect is on the floor of the market: the IEA reports that 70% of battery electric cars sold in China in 2025 cost less than the average conventional car, and that class of vehicle has no path into US showrooms under the current stack.

Batteries show the tariffs working as designed. Benchmark reported on 17 March 2026 that Chinese battery imports into the US had fallen to their lowest level since 2021 after the Section 301 rate rose to 25%, while forecasting 182 GWh of US lithium-ion demand in 2026, 37% of it for stationary storage. Benchmark also noted that US storage still leans heavily on Chinese LFP cells. That gap is where domestic investment is landing.

LG Energy Solution began production at its Lansing, Michigan plant in August 2026, making LFP cells for storage and NMC cells for Toyota's 2027 Highlander EV, with more than 35 GWh of planned capacity and more than $2 billion invested since 2022, per pv magazine USA (19 August 2026). Ford's wholly owned BlueOval Battery Park in Marshall, Michigan is ramping LFP cells under a CATL technology license, with market-ready cells expected before the end of 2026, per electrive (18 June 2026). The minerals layer remains the open risk: China suspended its October 2025 export controls on lithium batteries, artificial graphite anodes and rare earths until 10 November 2026, per Herbert Smith Freehills Kramer (18 November 2025), and as of 14 October 2026 no extension had been announced, per FXStreet.

Every change becomes the new normal

In 1865 Britain passed the Locomotive Act, which held self-propelled road vehicles to 4 mph in the country and 2 mph in towns and required a person to walk at least sixty yards ahead carrying a red flag. An 1878 amendment cut the distance to twenty yards and dropped the flag, though the walker stayed, per the National Motor Museum. Then the Locomotives on Highways Act came into force on 14 November 1896, three months after Royal Assent, freeing light vehicles under three tons from the walker and allowing 14 mph, a limit many local authorities set at 12. Harry Lawson marked the day with a run from London to Brighton, and the people who drove it had lived three decades with a rule that seemed permanent until the morning it ended.

The thread runs on. On 17 June 1930 Herbert Hoover signed the Smoot-Hawley Tariff over a petition from about 1,000 economists, and trading partners answered with tariffs of their own, per the US Senate Historical Office. Ninety-six years later, the 50% duties on Canadian goods described above rest on Section 338 of that same Tariff Act of 1930, in what Automotive Logistics calls its first known use. In December 1963 Lyndon Johnson answered European duties on American frozen chicken with a 25% tariff on imported light commercial vehicles, and NPR's Planet Money has documented how Ford later imported Transit Connect vans with rear seats fitted, then removed them in the US to classify the vehicle as a passenger van at entry.

The closest parallel to today began on 1 May 1981, when Japan agreed to cap car exports to the US at 1.68 million a year, a ceiling raised to 1.85 million in 1984 and to 2.3 million in a 1985 extension, per City Journal (10 October 2024). Japanese makers answered in two ways. Honda built the first Japanese car made in the US, an Accord, at Marysville, Ohio on 1 November 1982, Nissan followed at Smyrna, Tennessee in 1983, and Toyota formed NUMMI with GM in Fremont, California in 1984, per WardsAuto. Economist Robert Feenstra estimated in 1984 that about two-thirds of the rise in Japanese import prices in 1980 and 1981 reflected better-equipped cars, because a cap on units rewards selling more value per unit.

Read against that history, Chinese plug-in hybrids in Europe and BYD factories in Brazil and Hungary look familiar. Each wall changes the shape of the product and the map of production, and within a few years the new arrangement feels as fixed as the old one did. Daniel Kahneman and Amos Tversky showed in their 1979 work on prospect theory that people weigh losses more heavily than equal gains, which helps explain why every tariff, once set, gathers defenders among those who adapted to it. Our working rule is that the current stack is a starting position for the next negotiation, and the companies that do well plan for it to move.

What we take from it

Tariffs on electric vehicles and batteries now change on a calendar measured in months, set by courts, proclamations and bilateral deals. The companies we see handling it best treat trade exposure as an engineering input with owners, models and review dates. These are the moves we would make now if we were building, selling or funding a product in this market.

1. Build a line-level landed cost model by tariff code and country of origin, and rerun it whenever a proclamation lands. The difference between a 28.4% battery stack and one with the 12.5% forced-labor layer added is a single annex entry, so the model has to read the annexes.
2. Treat origin as a design decision from the first bill of materials. The connected vehicle rule reaches software in model year 2027 and hardware in model year 2030, so the source of a telematics module or a magnet now shapes which markets a product can enter.
3. Put the known dates on the board and assign each one an owner. The Chinese export control suspension ends on 10 November 2026, USMCA now runs on annual reviews, and USTR's excess capacity investigation is still open.
4. Keep entry records clean enough to claim money back. The US Treasury refunded $49.2 billion in IEEPA tariffs in June 2026 alone, per Automotive Logistics, and the American Bar Association notes that claims for older entries may need protests or court filings.
5. Underwrite plants on today's tariff wall, then stress-test the case where a negotiated door opens in it. Canada's quota and the EU's price undertakings show that walls gain doors, and a factory justified only by a single duty rate carries that risk.

The walker ahead of the engine lasted thirty-one years, and the Japanese export cap ran for more than a decade while transplant factories grew up around it. The tariff stack on Chinese EVs is two years old and has already been rebuilt twice. We expect it to keep changing, and we would plan every product, plant and fundraise so that it still works when it does.