[[{“value”:”
- New tariffs—especially the 64.9% rate on Chinese battery cells—threaten to significantly raise EV production costs and slow adoption in the U.S.
- Trump’s revocation of EV tax credits and mandates signals a dramatic pivot away from pro-EV policies.
- For Q1 2022, Tesla reported 336,681 deliveries for the first quarter, well below the Wall Street consensus of 377,000 vehicles and its lowest tally since 2022.
The U.S. stock market tanked for a second day running on Friday, with the S&P 500 falling -4.5% a day after U.S. President Donald Trump unveiled reciprocal tariffs, including a baseline 10% tariff applied on imports from all countries. The energy sector was one of the hardest hit by the tariffs, with the Energy Select Sector SPDR Fund (NYSEARCA:XLE) falling -7.4% on the day thanks to the ongoing oil price crash. Brent crude for June delivery fell -7.1% to trade at $65.47 per barrel at 11.50 am ET while WTI crude for May delivery declined -7.6% to trade at $61.94/ barrel. Both Brent and WTI crude are more than $10 per barrel lower from Wednesday’s close, the biggest drop since 2021.
The challenges for the energy sector are only beginning. The rapidly growing electric vehicle (EV) market is about to face significant pressure from rising tariffs, which will make EV batteries much more expensive. China, currently the largest exporter of battery cells to the U.S., is set to experience a substantial 64.9% tariff, including an additional 34% duty imposed by former President Trump on top of existing tariffs from previous administrations. In 2022, the U.S. imported $16.45 billion worth of battery cells from China—accounting for 70% of the total, a dramatic increase from just $2 billion in 2020. Meanwhile, Japan and South Korea are facing tariff rates of 24% and 25%, respectively. Imports of battery cells from Japan totaled $1.7 billion, while South Korea’s stood at $1.3 billion. Experts predict that the significant disparity in tariff rates between China and these two countries may result in Japan and South Korea capturing a larger share of the market, as they are currently the only viable alternative producers.
Overall, the new tariffs would add $8bn in costs for battery pack producers and EV makers.
Source: CNN
The only positive for the EV industry is that Trump’s tariffs are likely to encourage the U.S. to domesticate some of this battery cell production. However, doing this would be anything but easy, with the three countries likely to include exports of battery cell technology as part of retaliatory tariffs. Further, some of the raw materials that go into these batteries are likely to be affected by the tariffs.
“The Trump administration’s ‘Liberation Day’ announcement on tariffs are the biggest trade shock in history, representing a historic shift away from the long-term trend towards free trade,” chief economist at investment bank Macquarie Ric Deverell said. “The tariff increase far exceeds earlier expectations, highlighting the strong ‘re-industrialisation’ ideology of the Trump administration.”
Whereas key battery metals such as Lithium carbonate, lithium hydroxide, cobalt metal and cobalt sulphate are exempt from the tariffs, others like nickel sulphate, manganese sulphate, iron phosphate, phosphoric acid and synthetic graphite are not. The U.S. produces virtually zero nickel sulphate, and imported 1,872t from Belgium and 1,060t from Australia in 2024.
There’s a strong likelihood that Trump’s energy policies, including his latest tariffs, will slow down the EV momentum in the U.S. On average, EV battery packs cost around $10,000 to $12,000, or roughly a third the cost of a new Tesla Model 3. According to the experts, the people who have so far held off buying an electric vehicle are likely price-sensitive shoppers, leery of making major adjustments to accommodate an entirely new technology including charging anxieties and home equipment installations.
“EV adoption is looking to move into its next phase — requiring much more mass-market interest — and this larger cohort has to be sold on EVs since they aren’t as enthusiastic and willing as early adopters,” Jessica Caldwell, director of insights at Edmund, said.
Further, Trump has revoked the EV mandate, effectively killing the $7,500 EV tax credit for buyers.
One of the“Unleashing American Energy” directives pledges ‘‘…to eliminate the “electric vehicle (EV) mandate” and promote true consumer choice, which is essential for economic growth and innovation, by removing regulatory barriers to motor vehicle access; by ensuring a level regulatory playing field for consumer choice in vehicles; by terminating, where appropriate, state emissions waivers that function to limit sales of gasoline-powered automobiles; and by considering the elimination of unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs over other technologies and effectively mandate their purchase by individuals, private businesses, and government entities alike by rendering other types of vehicles unaffordable.’’
Indeed, the experts are now predicting a reset in the U.S. EV market, thanks in large part to sales decline by Tesla (NASDAQ:TSLA), the U.S.’ biggest EV seller. Tesla reported 336,681 deliveries for the first quarter, well below the Wall Street consensus of 377,000 vehicles and its lowest tally since 2022. Wall Street has quickly soured on the EV giant, with JP Morgan downgrading its TSLA rating due to ‘unprecedented brand damage.’
By Alex Kimani for Oilprice.com
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The post EV Battery Costs Set For Sharp Rise On Trump’s Tariffs appeared first on Energy News Beat.
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