Trump’s Mexico, Canada and China tariffs put risks on the EV and ESS industry

The threat of a global trade war looms large as President Trump introduced 25% on the US’ neighbours Mexico and Canada, as well as an additional 10% on China. These tariffs have sent shockwaves through global financial markets however what effect could these tariffs have on the EV and battery industries?

Update 06/03/2025: The Trump administration has put a one month reprieve on imports of USMCA compliant autos from Mexico and Canada into the US following a meeting with Ford, Stellantis and GM. Tariffs are still set to come into force on the 2nd of April.

Update 06/03/2025: Trump has paused all tariffs on Mexican goods covered by the USMCA until the 2nd of April

How will tariffs effect EV’s coming from Mexico to the US?

In 2024, approximately 170,000 BEVs were made in Mexico and exported to the US market according to Rho Motion’s EV production database. This equates to ~13% of all the BEVs sold in the US last year.

Many automakers have historically moved automotive production to Mexico as the country offers a cheaper workforce, VAT exemptions for US manufacturers producing US goods, close proximity to the US for ease of export as well as free trade with the US. More recently, automakers could also produce EVs there with their vehicles still eligible for the IRA tax credits.

A 25% import tariff erodes many of these benefits and leaves automakers unsure of what to do with their EV production capacity in Mexico.

Who are the largest EV exporters from Mexico?

The likes of GM, Ford and Honda have all built out significant EV production capacity in Mexico in recent years targeting the US market.

Ford has the largest BEV production capacity in Mexico of any automaker, and the country has been integral to Ford’s EV business over the past five years. Notably it is the only location which it makes its Mach-e, its best-selling EV worldwide last year. According to Rho Motion’s EV sales database it sold ~52,000 units in the in the US in 2024, all of which were made in Mexico. Already Ford has faced issues with the cost of production of its EVs, these tariffs will only increase costs for the company.

Similarly, GM has built out significant production capacity in Mexico, producing the Blazer, Equinox and most recently the Oqtiq in the country all for the US market. Elsewhere, GM also started producing Honda’s Prologue in the same facility in Mexico in 2024, and Stellantis has been building out its EV production capacity in the region with a factory slated to come online in February 2025.

Automakers have indicated that total vehicle prices are likely increase by 25% for vehicles coming from Mexico, in line with the tariffs. In the longer term however, automakers may try and export the vehicles made in Mexico to other countries with free trade agreements.

This is not just a story about the EV market, but about the automotive market as a whole, 2.7 million vehicles in total are exported to the US each year from Mexico. Meaning the tariffs will have a wide reaching effect.

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What do tariffs mean for cell production and the BESS industry?

In 2024, 90% of the US BESS market used Chinese LFP cells because they were the cheapest option even after paying tariffs. However, the new additional tariff may push players to find new sources of cells.

“The import tariffs means that on average the US manufactured cells become the cheapest option, particularly when considering domestic content adders under the IRA Investment Tax Credit” said Iola Hughes Head of Research at Rho Motion.

Tariffs on Chinese cells now sits at 27.5%, with this scheduled to increase in 2026 to 45%, this increasingly pushes BESS players towards sourcing US made cells. However, production capacity of US made LFP cells remains limited. With supply of US made LFP cells not reaching demand we may see an increase in the price of BESS systems, as players are forced to pay the high tariffs for Chinese cells.

More Information

For more information about how tariffs may effect the global EV & Battery landscape see our research or get in touch.

Image credit: Adobe Stock

Source: https://rhomotion.com/news/trumps-mexico-canada-and-china-tariffs-put-risks-on-the-ev-and-ess-industry/