Interest Rates, Inflation, EV Sales, & EV Transition In Coming Years – CleanTechnica

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We are all in a weird place right now with what to expect in the US EV market in the coming years. That’s in large part because we have no real idea what Donald Trump is actually going to do with regard to EVs, the economy, and tariffs.

Yes, he has said that he’s going to slap the biggest tariffs in the world on Chinese goods. Chinese EVs already have a 100% tariff, so I don’t expect that to change, but he’s said he wants to put big tariffs on all Chinese imports. That’s expected to result in growing inflation again. “[T]he Fed’s future moves are now more uncertain in the aftermath of the election, given that Trump’s economic proposals have been widely flagged as potentially inflationary.” If we face growing inflation again, instead of continuing to lower interest rates as the Fed has been doing, it will need to increase interest rates. And, if that happens, fewer people are likely to buy cars, including especially electric cars.

But then there’s another issue. Trump put a lot of unusual pressure on the Fed chairman when he was president last time to keep interest rates low — Jerome Powell had started raising interest rates to fight inflation and Trump didn’t like that. This time around, feeling more empowered, if Powell doesn’t lower interest rates or even starts raising them to deal with inflation, is Trump going to take the unprecedented move of pushing him out of office? And if he does that and bullies others at the Fed, will inflation get out of hand? Of course, if inflation gets out of hand, say bye-bye to a normal auto market.

There are a lot of different ways this could go. However, based on Trump’s repeated statements on tariffs, one can expect prices to go up and auto sales to go down, including EV sales. New EVs mostly replace old fossil fuel vehicles, so slowing EV sales would mean more dirty vehicles remain on the road. Similarly, forcing interest rates to remain low could cause growing inflation, which would probably hurt the EV industry in a similar way.

Oh, and then there’s the deportation matter. “Trump’s plan to impose at least a 10% tariff on all imports, as well as significantly higher taxes on Chinese goods, and to carry out a mass deportation of undocumented immigrants would almost certainly boost inflation,” the AP writes. “This would make it less likely that the Fed would continue cutting its key rate.”

In fact, we’re already seeing some effects of Trump being elected, and they’re not good. “Broader interest rates have risen because investors are anticipating higher inflation, larger federal budget deficits, and faster economic growth under a President-elect Trump. […] [I]nvestors now foresee rate cuts next year as increasingly unlikely. The perceived probability of a rate cut at the Fed’s meeting in January of next year fell Wednesday to just 28%, down from 41% on Tuesday and from nearly 70% a month ago, according to futures prices monitored by CME FedWatch.”

We will see what comes to pass, but, for now, based on what’s been said and done by Trump, we can expect dampened EV sales in the US and a slower EV transition.