Expect Pricier EVs, Solar Panels, and Heat Pumps as a Result of Trump’s Tariffs

Trump’s first round of tariffs will cost the United States some 142,000 jobs.Justin Sullivan / Getty via Grist

This story was originally published by Grist and is reproduced here as part of the Climate Desk collaboration.

Shortly after he was reelected last month, Donald Trump announced an economic gambit that was aggressive even by his standards. He vowed that, on the first day of his second term, he would slap 25 percent tariffs on imports from Canada and Mexico, and boost those already placed on Chinese products by another 10 percent. 

The move set off a frenzy of pushback. Canadian Prime Minister Justin Trudeau even flew to the president-elect’s Florida resort to make his case. Economists say the potential levies threaten to upend global trade—including green technologies, many of which are manufactured in China. The moves would cause price spikes for everything from electric vehicles and heat pumps to solar panels. 

“Typically with tariffs, we’ve seen [companies] pass them along to the consumer,” said Corey Cantor, electric vehicles analyst at Bloomberg NEF. Ansgar Baums, a senior fellow at the nonpartisan foreign policy think tank Stimson Center, said retaliatory moves from the three targeted countries would only make things worse. “It will drive up consumer costs and hurt those who cannot afford it.”

Trump has acknowledged that possibility. But he has argued that tariffs are necessary to force Canada and Mexico to crack down on drugs, particularly fentanyl, and on migrants crossing the border into the US. 

It’s not the first time Trump has turned to tariffs as a foreign policy tool. In 2018 and 2019, he imposed them on a litany of goods, from steel and aluminum to photovoltaic solar panels and washing machines. While the Biden administration eased some of those duties, it kept many in place, especially those targeting China, and recently raised tariffs on Chinese items including electric vehicles, solar cells, and EV batteries. Experts say these efforts have done little more than raise prices. 

“The consensus on the first round of Trump tariffs is that [they] generally did not improve American productivity,” said Alex Muresianu, a senior policy analyst at the Tax Foundation, a right-leaning think tank. The nonprofit calculated that, in the long run, Trump’s first round of tariffs will hurt gross domestic product and cost the United States some 142,000 jobs. Baums was even more blunt about their impact: “They were a big failure. They didn’t achieve much.” 

The recently threatened tariffs would ratchet prices even higher on things like solar panels, but are also much more far-reaching because of their broad application to North American trading partners. One sweeping impact would be on gasoline prices, because although the US is world’s largest oil producer, older domestic refineries can only process the type of heavier crude that comes from Canada. GasBuddy projects that tariffs could add 35 cents to 75 cents on a gallon of gas.

Automakers will also be hard hit, as $97 billion in parts and some 4 million vehicles come from Canada and, especially, Mexico. That’s where some of the more affordable EVs, such as Ford’s Mustang Mach-E and the Chevrolet Equinox, are manufactured. Wolfe Research said that “given the magnitude, we’d expect most investors to assume Trump ultimately does not follow through with these threats,” but that if they were put in place, tariffs would add $3,000 to the price of the average car, regardless of whether it’s powered by gasoline or a battery.

Cantor, at Bloomberg NEF, says adding even a few thousand dollars to the price can drastically expand or contract the potential market of buyers for a vehicle. For example, about 70 percent of consumers consider buying a $35,000 car, a number that jumps to about 87 percent when a car is $30,000. 

“People adjust their behavior,” he said. That could further harm an EV sector that will also likely be reeling from Trump’s rollback of federal tax credits for electrified vehicles. 

Baums doesn’t believe that more tariffs will meaningfully shift industries to the US and that the Trump administration “underestimates” how complicated that process would be. Others say some relocation could occur. Michelle Davis, director and head of global solar for research firm Wood Mackenzie, wrote that the levies “would undoubtedly increase domestic manufacturing activity to meet market needs.” But even then, she adds, that “this would result in a more expensive market for domestic buyers.”

In addition to prices, Muresianu also worries that the type of protectionism that Trump favors could stymie innovation. He points to the US shipbuilding industry as an example: It once supplied most of the world’s ships, but in large part due to policies meant to shield domestic shipyards from competition, American vessels have since become drastically more expensive than those made overseas and now account for less than 1 percent of the global total. Tariffs could impose similar stagnancy on other US industries, Muresianu says.

Baums’ concerns are more existential. Trump, he says, is geopoliticizing issues like climate change in ways that will ultimately make it more difficult to share technology, lower costs, and combat greenhouse gas emissions. He would like countries to instead come together and agree that some industries—including cleantech—are too important to put at the center of a trade war.

“The planet is burning,” said Baums. “If there’s anything we should try to cooperate on, it’s stuff that makes a clean transition happen.”