JMA-PSOS

At a Glance

* Tariffs on EV components raised costs for manufacturers and slowed infrastructure development nationwide
* Federal EV tax credits terminated in September 2025 reducing consumer purchase incentives significantly
* NEVI charging program froze approvals delaying corridor fast-charging station deployment across states

Exactly one year ago today, Donald Trump was inaugurated as US President for the second time. One year on, it’s worth noting how his 2025 policy reset has reshaped the US EV landscape. Tariffs lifted costs across vehicles, batteries, and charging hardware. Federal infrastructure momentum stalled. Regulatory drivers that encouraged EV adoption were weakened. And incentives that helped close price gaps for consumers and fleets were curtailed or timed out.

In aggregate, these moves narrowed near‑term competitiveness for domestic EV makers as Chinese OEMs continued scaling volumes and cutting costs abroad—pressuring US incumbents at precisely the moment the global market is accelerating.

Here is the timeline of eleven specific government actions undertaken last year that worked against the interests of EV developers and customers.

1. January 20, 2025: Day‑One executive order reorients energy and EV policy
2. February 6–7, 2025: FHWA freezes NEVI plan approvals and new obligations
3. Early March 2025: Federal fleet retreat from EVs; charger deactivations
4. April 2, 2025 (effective April 5): Global “reciprocal” tariff regime
5. April 18, 2025 (effective May 19): FHWA repeals highway GHG performance measure
6. June 11, 2025: NHTSA “resets” CAFE, excluding EVs and credit trading
7. June 12, 2025: CRA resolutions target California’s EPA waivers
8. July 4, 2025: “One, Big, Beautiful Bill Act” curtails EV credits; removes CAFE penalties
9. July 30, 2025 (effective August 29): De minimis duty‑free entry suspended
10. August 1, 2025 — EPA Proposes to Rescind the Endangerment Finding and Tailpipe GHG Standards
11. December 5, 2025 — NHTSA Proposes SAFE Rule III, Weakening Light‑Duty CAFE and Ending Credit Trading

2026: The rest of the world moves forward as US automakers navigate constraints

The 2025 data paint a clear gap: EVs were roughly 11% of U.S. new‑car sales versus nearly one in four across Europe (EU BEV share 16.9% year‑to‑date by November) and about 60% in China—evidence that mainstream adoption is advancing faster abroad. Charging infrastructure tells the same story: China added hundreds of thousands of public fast chargers in 2024–2025, lifting public charging capacity per EV above 3 kW, while the US reached only about 65,000 DC fast‑charging ports by November 2025. And mature markets such as Norway are already near‑fully electric—95.9% of new‑car sales in 2025—underscoring how much ground the US must make up.

And just this week, Canada signed a strategic agreement with China that opens the door to higher-range, lower‑cost Chinese‑made EVs entering the Canadian market under a 6.1% MFN tariff, with an initial quota of 49,000 vehicles and an affordability target that reserves half of the quota for EVs priced under CAD $35,000 by 2030. This development increases competitive pressure at America’s doorstep.

The race for EV market share was never going to be easy for US automakers. It’s too bad the federal actions of 2025 make it even harder for them to keep pace.

The report acknowledges that the era in which the European Union relied on cheap Russian energy, boundless Chinese markets, and U.S. security is over.

Innovation, Decarbonization, Competitiveness, and Security

The first challenge is innovation. Draghi notes Europe’s strong innovation capacity but highlights that over one-third of its corporate “unicorns” relocate abroad, primarily to the United States, due to regulatory, financial, and training barriers. To bridge this gap, the report proposes several measures: creating a European Advanced Research Projects Agency (ARPA), incentivizing business angels and seed capital, involving the European Investment Bank, reforming pension plan regulations to channel European savings toward investment, and simplifying the research and development (R&D) framework program. It also suggests enhancing academic excellence, investing in research infrastructure, increasing R&D spending, and fostering a more innovation-friendly regulatory ecosystem. A focus on lifelong learning to upgrade workers’ skills is also emphasized.

The second challenge is aligning decarbonization with competitiveness. The energy crisis has led to significantly higher energy costs in Europe, which is undermining European competitiveness. Thus, the effort to decarbonize is an economic necessity. Draghi argues that decarbonization can boost competitiveness if well-managed but risks undermining it if it is poorly executed, especially if dependent on subsidized Chinese technologies. With European firms already facing higher energy costs than their U.S. counterparts, this disparity threatens growth if clean energy benefits do not lead to lower prices. Draghi advocates for a reform of the European electricity market to pass decarbonization benefits to consumers and suggests European-level industrial policies in clean technologies and electric vehicles to maintain a level playing field. The report details sector-specific competitiveness measures for energy, clean technologies, key raw materials, automotive, pharmaceuticals, transport, aerospace, and high-tech sectors.

The third challenge lies in investing and integrating Europe’s defense industry. The report gives a brutally frank assessment of the poor state of Europe’s defense industrial sector. Analyzing the sector through an economist’s lens, Draghi highlights the sector’s intense fragmentation when what it needs is scale and demand aggregation. Like the EU Defense Industrial Strategy, Draghi also highlights the amount of money spent on procurement outside of the European Union, which is as high as 80 percent. The report calls for more EU funding and an EU Defense Industry Authority to procure on behalf of EU countries, thereby aggregating demand and taking advantage of economies of scale. The report also calls for a European preference principle to “buy European” that could come with incentives—a recommendation that will make U.S. defense companies nervous.

Fourth, on economic security, the report stresses the need for greater EU strategic autonomy and economic security to reduce susceptibility to economic coercion by third countries. This requires increased defense spending, a more autonomous defense industry, and a policy for securing critical minerals. While acknowledging the high costs of autonomy, Draghi suggests mitigating these through cooperation among member states and trade agreements with non-EU member countries. The report also proposes a “foreign economic policy” that involves joint investments and purchases based on the European Union’s large internal market. Contrary to U.S. protectionism, Draghi supports free trade agreements as tools to enhance security and derisking.

Financing the Plan

Draghi quantifies the additional annual investment needs at over €800 billion, or about 5 percent of EU GDP.