As the World Embraces EVs, the U.S. Hits the Brakes

The United States is decoupling itself from the global electric vehicle trajectory by prioritizing trade barriers over market adoption. While global EV sales grew 20% in 2025 to exceed 20 million, the U.S. market is moving in the opposite direction. According to data from the International Energy Agency and Cox Automotive, one in four new cars sold worldwide is now electric, yet U.S. EV sales fell 2% last year.

This divergence is a direct result of deliberate policy. The U.S. has implemented 100% tariffs on Chinese cars and a separate 25% duty on all imported vehicles. These protections, combined with the expiration of a $7,500 rebate last September, have stripped the market of its most affordable options. As Egor Prokhodtsev of Wood Mackenzie notes, the issue is a supply-structure problem rather than a gas-price problem. The removal of subsidies made this structural reality impossible to ignore.

The impact on domestic manufacturing and sales is visible in the quarterly declines. In 2025, fourth-quarter U.S. sales fell 36% year on year, and the decline continued into the first quarter of 2026, when sales dropped 27%. Several major U.S. automakers saw quarterly EV sales decline 60% to 70%. No domestic automaker has produced an alternative to the affordable Chinese models at a similar price point.

While the U.S. restricts access, other regions are integrating these supply chains. The European Union and Canada have opened their markets to Chinese EVs. Canada, for instance, allowed imports starting in March at a 6.1% tariff, down from 100%, with a yearly cap of 49,000 vehicles.

The global momentum remains intact. In 2025, EV sales rose more than 30% in Europe, 80% in Asia-Pacific markets outside China, and 75% in Latin America. About 30 countries recently recorded an all-time high in monthly EV sales.

The U.S. strategy creates a bifurcated global market. By cutting off the cheapest foreign models and increasing duties, the U.S. is betting that domestic production can eventually bridge the price gap. However, the current data suggests that protectionism is currently suppressing demand rather than stimulating a domestic transition.

The question for U.S. policymakers is whether domestic manufacturing can scale fast enough to replace the lost volume before the gap between the U.S. and the rest of the world becomes permanent.