The 25-percent tariffs ordered by President Donald Trump on imported vehicles and parts have rattled the auto industry. Dealerships fear vehicle prices could rise by as much as $10,000 on average—on cars that already cost around $48,000. Trump, however, has remained unfazed, claiming higher prices are a worthy tradeoff for boosting domestic manufacturing. But hidden in this aggressive “America First” policy is a major setback for one of the fastest-growing sectors in US auto manufacturing: electric vehicles, Politico reported.
EVs: Growth threatened by policy shifts
Electric vehicle sales grew by 7 percent last year, driven by Biden-era incentives and new model rollouts, especially in Republican-leaning states across the Midwest and South. These gains also sparked job creation in rural communities, many of which are home to newly built EV and battery factories. But Trump has made his disdain for EVs clear—calling the shift a “transition to hell”—and he’s promised to reverse the Biden administration’s signature climate law, the Inflation Reduction Act (IRA), which underpins most of these incentives.
If Trump follows through on abolishing the $7,500 EV tax credit and keeps tariffs in place, the result could be a one-two punch that decimates demand for EVs—and potentially wipes out thousands of jobs in red states where new EV plants are concentrated.
Why Tesla might still come out ahead
Despite the policy storm, Tesla could emerge as one of the few winners. All of the 600,000+ Teslas sold in the US last year were assembled domestically, in California and Texas. Tesla also manufactures many of its own components in-house, such as seats and motors, which means it relies less on foreign parts that would be hit by the new tariffs. This high level of domestic content shields Tesla more than most automakers.
Even so, Tesla CEO Elon Musk has acknowledged the pain the tariffs will cause. “Not trivial,” he said. But in relative terms, Tesla’s vertically integrated model gives it a competitive edge in a tariff-heavy landscape.
As for whether Trump designed the policy to benefit Tesla specifically—it’s unlikely. Trump has supported tariffs long before his current alignment with Musk. But their interests now overlap: both prefer American-made goods and show little interest in expanding subsidies for clean energy.
Hyundai and the politics of perception
Hyundai may also sidestep some of the fallout, thanks to optics and timing. The company recently opened a massive EV factory in Georgia—the same day Trump announced the new tariffs. And Hyundai’s chair made a public appearance with Trump at the White House to tout $21 billion in US investments. It gave the impression that Hyundai was responding to Trump’s demands, though the plant itself was planned during Biden’s presidency and was designed to leverage IRA tax incentives.
This facility is more than symbolic. It anchors a growing web of supply chain operations in the South, including 17 parts plants built around it. But its future—and the future of hundreds of similar projects—could be in jeopardy if Trump guts the EV tax credit.
Why kill a policy meant to promote domestic manufacturing?
The irony is stark: the EV tax credit was built to encourage US manufacturing. To qualify, automakers must increasingly source components from the US or close trade allies, thus reducing reliance on China. Removing the credit would undercut that goal.
Still, many Republicans support ending the credit, arguing that it distorts the market and could fund a Trump-led income tax cut. A Harvard study estimates ending the EV credit would save $168 billion over 10 years. But the savings could come at a steep cost—especially in GOP districts.
Factories at risk, jobs in limbo
A Princeton study published in March projected that any EV or battery factory launched after 2026 might never be needed if the tax credit disappears. Demand would simply collapse. That’s a chilling forecast for the 228 battery supply chain projects now in progress, representing 118,000 prospective jobs nationwide.
Faced with this reality, some Republican lawmakers are quietly shifting their stance. Instead of abruptly killing the tax credit, they’re floating a gradual phase-out—seeking to balance political ideology with the economic benefits their own constituents now depend on.
In the end, Trump’s tariffs may deliver more damage than intended. While they could boost some legacy automakers and a company like Tesla, they also threaten to gut an industry that has finally taken root in rural America. For now, Tesla’s domestic model might allow it to weather the storm. But for the broader EV industry—and the communities investing in its future—the road ahead looks far more uncertain.
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