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If President Trump’s proposed 25% tariffs on Mexico and Canada — which were set to begin tomorrow morning before the two countries’ leaders negotiated 30-day delays — were to go into effect, they would hit automotive supply chains like a lightning bolt. A single spring inside a fuel pump can zig-zag across the northern and southern U.S. borders half a dozen times before making it into a vehicle. The jolt of tariffs would follow it, gathering force at each crossing before shocking car buyers with higher prices.
Electric vehicles, however, famously do not have as many parts as conventional cars. There’s no engine, transmission, exhaust system, or fuel pump. EV drivers will also not have to contend with the effect of tariffs on the price of gasoline. So does it follow that, despite Trump’s wish to undo Biden’s EV subsidies, he would actually be making battery-powered cars more competitive?
Experts I spoke with agreed that EV manufacturers might be somewhat less exposed. But the tariffs will still affect them, and the small edge could be outweighed by other Trump administration policies.
An internal combustion engine vehicle can have 20,000 to 30,000 parts, Amy Broglin-Peterson, an expert in automotive supply chains at Michigan State University, told me; an electric vehicle might have anywhere from several hundred to a few thousand. Many of these components are manufactured by independent specialists throughout North America. “They’ll be assembled utilizing cheaper Mexican labor, and then they’ll cross back into the U.S. and be put into a bigger assembly, which is then sent back down again for either more assembly work or finished vehicle production,” she said.
Electric vehicles also contain many of the same complex components as conventional cars, like seats and lights and dashboards and radios and mirrors. “That’s kind of the great equalizer amongst these different vehicles,” Mike Wall, an auto analyst at S&P Global Mobility told me. “They’re all going to be in the same soup in terms of vulnerability to cross-border trade.”
But EVs lack the most complex component of all — the engine. Instead, EVs have a battery, and many automakers are either already producing their batteries in the U.S. or are building new factories to do so. As of December, there were more than 80 facilities making battery components, assembling battery packs and cells, manufacturing drive units, producing EV chargers, and doing final EV assembly in the U.S., according to a database maintained by Wellesley University historian Jay Turner. But that’s set to increase over the next few years due to tax incentives and grants that were part of Biden’s Bipartisan Infrastructure Law and Inflation Reduction Act, which reward domestic manufacturing of clean technology components. More than 200 additional facilities, including critical mineral extraction and processing facilities, are in various stages of development.
Broglin-Peterson told me her quick answer to my question is that EVs likely wouldn’t be hit quite as hard by tariffs as conventional cars. But she emphasized that they will still see an impact, and she wasn’t sure of the extent to which other Trump administration policies would undermine any tariff-related advantages. “The EV picture right now has become a lot more murky, obviously, since President Trump was elected,” she told me. “I do think the traditional automakers are more heavily leveraged, though, on their internal combustion engine supply chains.”
Wall agreed that EVs were somewhat less exposed, but he said it really depends on which internal combustion engine vehicle you’re comparing them to. Some engines are assembled in the U.S. and have more U.S.-manufactured components than others. Battery makers are still vulnerable, as the processing of the critical minerals that go into EV batteries is currently heavily concentrated in China, which will also be hit by 10% tariffs on top of existing tariffs on Chinese goods. When you take into account the president’s plans to end the electric vehicle tax credit and leasing option, which can shave up to $7,500 off a car’s sticker price, EVs could still end up less competitive than before Trump took office, Wall said.
Some electric vehicle producers will be hit harder than others. Tesla, for instance, has one of the lowest exposures to non-U.S. content, according to data collected by the Department of Transportation. But some 20% to 25% of Tesla components come from Mexico.
“There’s a lot of uncertainty around tariffs,” Vaibhav Taneja, Tesla's chief financial officer, said during an earnings call last week. “Over the years, we’ve tried to localize our supply chain in every market, but we are still reliant on parts from across the world for all our businesses.” The company’s stock price dropped 5% on Monday, though that may be partly because the company also lost market share in Europe.
Rivian builds its EVs in Illinois and is opening a second factory in Georgia. But the company’s CEO RJ Scaringe told Inside EVs that tariffs will still hurt. “Many, many, many hundreds of billions of dollars have been invested in Mexico in production capacity for supply chains that supply to all of us,” he said. “That will need to get remapped or will just carry higher costs.”
Other manufacturers are more spread out. Ford assembles its Mustang Mach-E in Mexico and its F-150 Lightning in Michigan. GM makes its Chevy Silverado, GM Sierra, and Cadillac Escalade EVs in Michigan, but its Equinox and Blazer EVs in Mexico. Stellantis makes its electric Jeep Wagoneer in Mexico, but recently invested more than $400 million to prep three of its Michigan factories for EV assembly.
Analysts told me not to expect any sudden moves from car companies. “Revamping the automotive supply chain to be 100% U.S. based is probably not realistic,” David Whiston, an equity strategist who covers the auto sector for Morningstar, told me in an email. “Companies right now are not willing to pivot capacity on a dime — they won’t allocate capital without more certainty.”
Trump doesn’t have much interest in certainty. After threatening to put the tariffs into immediate effect last weekend, the president quickly struck agreements with Mexican president Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau on Monday to pause the tariffs for 30 days while the countries negotiate. He has yet to discuss next steps with China.
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A little-noticed provision would make the payment option used by tax-exempt groups all but impossible to claim.
A little-noticed provision in the Senate tax bill will sabotage the efforts of tribes, rural electric cooperatives, and public power authorities to develop local affordable energy projects by striking a section of the Inflation Reduction Act that enabled tax-exempt groups to claim the clean energy tax credits as direct cash payments from the Treasury.
The IRA included strict domestic sourcing requirements beginning in 2026 for groups utilizing this “direct pay” option. But the law also created exceptions for cases where domestic components were not available in sufficient quantity or quality, or would increase costs by more than 25%. The Senate bill would get rid of these exceptions.
“It just makes it unlikely for those projects to go forward — or more likely for those projects to go forward with a private developer, instead of with a public utility or a tribe or a rural co-op,” Grace Henley, a tax attorney with the Natural Resources Defense Council, told me. “And so they don’t really do anything to increase the amount of domestic material that would be used, they just hurt the projects that are seeking to invest in clean energy infrastructure for these communities to lower costs.”
Public power and tribal energy advocates warn that without the exceptions, energy development will become impossible for their constituents.
Wind and solar projects being developed by these groups are already threatened by the bill’s rapid phase-out of wind and solar tax credits and its complex rules related to using materials from China. Chèri Smith, the executive director of the Alliance for Tribal Energy, told me that Tribes face longer development timelines than the average private developer. “We have multiple stages of approval that are unique to tribal energy development,” she told me, including lengthy internal consultation processes. The changes to direct pay will put these projects further out of reach, she said.
The Alliance provides free energy development consulting services to more than 100 Tribes. Smith sent me a list of projects in Alaska Native villages, Arizona, California, and Oregon that could be killed by the tax credit changes. “Alaska Native villages face some of the highest energy costs in the country,” she said, largely due to their reliance on diesel generators. Just over a third of the Hopi Tribe in Arizona lacks access to electricity, but now multiple microgrid projects meant to close the gap are at risk. Many of the projects on the list are also doubly threatened by grant cancellations and the repeal of the Tribal Energy Loan Guarantee Program.
“The bill is particularly harmful to Tribal Nations, pulling the rug out from under projects that would strengthen their energy sovereignty and power local communities,” Democratic Senators Martin Heinrich, Ron Wyden, and Brian Schatz wrote in a joint statement on Thursday. “Together, the Tribal Energy Loan Guarantee Program and our Inflation Reduction Act’s clean energy tax credits have cleared pathways and removed significant barriers for Tribes to finance and build their own resilient energy infrastructure.”
The American Public Power Association is also sounding the alarm. John Godfrey, the group’s senior government relations director, told me that in addition to wind and solar, municipal utilities and rural electric co-ops are also considering nuclear and hydropower projects. For example, Energy Northwest, a consortium of 29 public utilities in Washington State, has plans to retrofit the Columbia Generating Station nuclear plant to increase its power output. It’s also in early stages to deploy four small, modular nuclear reactors. As my colleague Matthew Zeitlin wrote a few days ago, the governor of New York has also tasked the New York Power Authority with developing a new nuclear plant in the state.
Nuclear and hydropower “are technologies where often there is not a U.S. source, but there is a good trading partner source — Canada, Germany, Japan,” Godfrey said. By tightening the domestic sourcing requirements for direct pay, the bill would “hinder the very technologies that there’s generally a bipartisan consensus we need to be developing.”
Public utilities and electric co-ops, which serve close to 30% of electric customers in the U.S., are also unfairly singled out by the provision, he said. “If my public power utility wants to develop a project and they need a Canadian turbine, they can’t get any credit. But if a taxable corporation down the street develops exactly the same project, they can.”
“If the purpose is to encourage hydropower, that’s not a good use of resources,” he said.
Senate Republicans tucked a carveout into their reconciliation bill that would allow at least one lucky renewable energy project to qualify for a major Inflation Reduction Act tax credit even after the law is all but repealed.
The only problem is, it’s near impossible to be sure right now who may actually benefit from this giveaway — and the mystery is driving me up the wall. I feel like Charlie Day in that episode of It’s Always Sunny in Philadelphia, stringing documents together and ranting like a lunatic.
The Senate bill would phase out the tech-neutral production tax credit starting next year and completely eliminate it by the start of 2028. For the past week and a half, I have been trying to solve the riddle of an exemption tucked into the language that would allow a wind or solar facility that is “part of a single project” to continue to take advantage of the tech-neutral production tax credit as it exists today, which means it would not begin to phase out until 2034.
To qualify for the exemption a project must, according to the Senate text, meet two conditions: It must produce more than 1 gigawatt of electricity, and be sited on federal lands where a “right-of-way grant or lease” had been given by the Bureau of Land Managementbefore June 16, which is the date the text was released.
Only a handful of projects in the U.S. could possibly fit that criteria. But every time I think I’ve identified one that will actually qualify, I learn a new fact that, to me, takes it out of the running.
Here’s why my head hurts so much: A renewables facility that would benefit from this language needs to be sited at least partially on federal lands. But because Trump isn’t issuing new right-of-way approvals or leases to most renewables projects right now, it likely had to get its right-of-way or its lease before he entered office. (The June 16 language feels like a bit of a red herring. Nothing that fits the other definitions has received these documents since the start of Trump 2.0.)
Then there’s another factor: The only projects that would benefit from this language are ones that haven't started construction yet. Even if a project doesn’t have all of its permits for federal land use, its developer can build stuff like roads on any connected private lands and technically meet the deadline to start construction laid out in the new legislation. The construction start date is what counts — it doesn’t matter whether a project is placed in service and provides power to the grid years later, as long as it began construction before that deadline.
Taken together, all this means that a project that would benefit from this language probably has to be sited on federal lands and hold permits already … but for some reason can’t start construction to qualify for the program.
When I first started hunting for an answer, many people — including renewables advocates, anti-wind activists, and even some Senate staff in conversations with me — speculated that the language was a giveaway to two wind projects under construction in Wyoming, Chokecherry and Sierra Madre, which together make up what would likely be the largest wind farm in the U.S. if completed. These two projects are largely sited on federal lands and received all their approvals before Trump entered office.
I understand why people are pointing at Chokecherry and Sierra Madre. They are not expected to be online before 2029, and the House version of the bill would have locked them out of the production tax credit because it added a requirement that projects be “placed in service” — i.e. actively providing power to the grid — by around that same period. Any slippage in construction might have really hurt their finances. They’re also backed by a powerful billionaire, GOP donor and live entertainment power-broker Phil Anschutz, a man who made his initial fortune partially from fossil fuels.
Except … my colleagues and I are still not convinced. That’s because it is not clear that these two projects are at any actual risk of losing the production tax credit. They have been actively under construction for a long time, and the Senate bill killed the House’s “placed in service” requirement.
Another project floated is the Lava Ridge wind farm in Idaho, which was fully permitted under Biden, is largely sited on federal lands, and would produce more power than necessary to qualify for the exception. Hypothetically, this project would be a great candidate for being a beneficiary of the bill because Trump banned work on the project via executive order amid opposition from Idaho politicians, making a carveout to get more time a worthwhile endeavor.
Except … Senate Finance Chair Mike Crapo, the lead author of the pertinent section of the Senate reconciliation bill, was one of those Idaho politicians who pushed Trump to kill Lava Ridge. Why would he give a tax break to a project he wanted dead?
Then there was my personal best guess for the beneficiary: Esmeralda 7, an expansive set of proposed solar farms in the Nevada desert that, as proposed, would produce more than 5 gigawatts of power and is largely sited on federal land. Construction can’t begin until Esmeralda 7 gets its federal approvals, and the Trump administration was expected to complete that work by mid-summer.
Except … I reported last week that the permitting process for Esmeralda 7 is now indefinitely stalled. The project is at best still months away from getting its right-of-way approvals from the Trump administration, which recently pushed back timelines for finishing reviews of other large Nevada solar projects, too.
Ultimately, it will be difficult to glean who the lobbyist giveaway here is for unless the legislators who wrote it disclose their intentions. I reached out to the communications director for Republicans on the Senate Finance Committee to try and find out, but so far I’ve gotten crickets.
It may be that this language is revised and that future changes lay out the true beneficiary. Sometimes lawmakers will put the wrong date or word into a bill and they’ll edit it on the floor before a vote, chalking it up to a drafting error.
If senators decide to add back the “placed in service” requirement to capitulate to the House, this would easily be the Chokecherry-Sierra Madre giveaway. If Republicans were to shift forward the deadline for getting a right-of-way, Esmeralda 7 would qualify. Or maybe they could change some secret third thing and a different project I hadn’t considered will be revealed as the mastermind in the shadows.
Until then, I’ll be in my basement poring over more maps and going slowly insane.
Additional reporting was provided by Emily Pontecorvo.
On resuming rare earth shipments, hurricane tracking, and EV tax credits
Current conditions: The Ohio Valley is still sweltering through the last remnants of this week’s brutal heat wave • The death toll from recent floods in South Africa has risen to 101 • It’s 90 degrees in Venice, Italy, where the world’s rich and famous are gathering for the wedding of Jeff Bezos and Lauren Sanchez.
The U.S. and China have hammered out the details of a trade deal, including an agreement that China will resume rare earth shipments to the U.S. Rare earth materials are essential for everything from planes to EVs to wind turbines. China controls most of the world’s rare earth production and halted exports in April in response to President Trump’s tariff hike, and China’s chokehold on rare earths threatened to derail trade talks between the two countries altogether. Commerce Secretary Howard Lutnick said a deal has now been “signed and sealed.” “They’re going to deliver rare earths to us,” Lutnick said, adding that the U.S. will then “take down our countermeasures.” Lutnick also indicated that Trump plans to announce further trade deals with other nations in the coming two weeks.
As climate talks in Bonn, Germany, wind down, negotiators there have agreed to increase the budget for the United Nations Framework Convention on Climate Change by 10% over the next two years to 81.5 million euros ($95.4 million). The UNFCCC runs some of the world’s largest climate negotiations and tries to ensure countries follow through on their climate commitments. Its budget is funded by government contributions. China will account for 20% of the new budget, Reuters reported. The U.S. is supposed to cover 22%, but President Trump has pulled international climate funding. Former New York Mayor Michael Bloomberg’s philanthropic arm has stepped in to cover the missing U.S. contributions. UN climate chief Simon Stiell said the budget increase was “a clear signal that governments continue to see UN-convened climate cooperation as essential, even in difficult times.”
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Hurricane forecasting is about to get a little bit more difficult. At the end of June, the federal government is going to stop distributing readings from the Defense Meteorological Satellite Program, a tool forecasters all over the world have been using to track and predict hurricane development. As retired federal meteorologist Alan Gerard told Bloomberg, this particular satellite program is unique because it lets forecasters peer inside storms and monitor for rapid intensification. As the planet warms, hurricanes are strengthening much faster than they did in recent decades. Hurricane expert Michael Lowry says the Department of Defense seems to be concerned that the satellite data poses a security concern. Its termination “will severely impede and degrade hurricane forecasts for this season and beyond, affecting tens of millions of Americans who live along its hurricane-prone shorelines,” Lowry wrote.
A group of U.S. car dealers penned a letter urging senators to “reject provisions in the budget reconciliation process that would abruptly eliminate EV-related tax credits from the Inflation Reduction Act,” warning that sudden changes would bring about market uncertainty, damage businesses, and hurt Americans. The signatories – including EV Auto, Carmax, and Caravan – instead call for a “gradual sunset” of the EV tax credits to avoid disruption to the used car market. “A multi-year transitional period would also provide the opportunity for Americans to continue adopting cleaner vehicles more affordably,” they add. The tax and budget bill put forward by Senate Republicans would end the $7,500 EV tax credit within 180 days after the law’s passage.
A report out today from the International Council on Clean Transportation estimates that the world’s private jets produced more greenhouse gas emissions in 2023 than all the flights that took off from Heathrow Airport — the world’s fourth busiest airport — that same year. Emissions from private jets increased 25% over the past decade. A few more interesting (though perhaps not surprising) tidbits from the report:
International Council on Clean Transportation
Solar power accounted for more than 10% of U.S. electrical output in April, while wind provided about 14%. As Michelle Lewis at Electreknotes, “solar is now producing more electricity than hydropower, biomass, and geothermal combined.”