The 25 percent Section 232 tariff on imported light vehicles, in force since April 2025, is the lever a Forbes analysis identifies as one of two policy tracks threatening to hollow out U.S. auto manufacturing.

The piece, headlined "Tariffs And Policy Repeals Could Force U.S. Auto Industry To Fail, Ceding Economic Growth To China," names the second track as the rollback of Inflation Reduction Act (IRA) subsidies that have supported domestic EV and battery production since 2022.

What tariff regime is in force?

A parallel 25 percent duty on select engines, transmissions, drivetrains and battery components took hold in May 2025. Vehicles assembled in the U.S. but built with non-domestic content remain subject to a 15 percent duty on the foreign value.

The compounding effect lands hardest on Mexican parts, which feed both U.S. final assembly and a rising share of EV battery production.

For Tier 1 suppliers (companies that sell directly to the automaker), the math is unforgiving. Component plants in Mexico and the U.S. Midwest typically run on 6-9 percent gross margins (revenue minus direct production cost, expressed as a percentage). A 25 percent cross-border duty pushes most of them negative.

Several Tier 2 vendors (firms supplying the Tier 1s) have paused second-shift expansion in Ohio and Indiana. The downstream effect is a slower ramp on Stellantis and GM truck programs that depend on Mexican machined components.

Why do policy repeals matter?

The IRA tied $7,500 in consumer EV tax credits to North American final assembly and to a battery mineral and component sourcing test favoring U.S. free-trade partners.

Repeal proposals target both the credit itself and the sourcing requirement. The production-side instruments — $35 per kilowatt-hour for U.S.-made battery cells (the 45X Advanced Manufacturing Production Credit) and the Critical Minerals Producer Credit — face similar scrutiny in Congressional markup.

Joint-venture battery plants in Georgia, Kentucky and Michigan anchor the dispute. A greenfield gigafactory (a new-build plant rated at roughly 20 gigawatt-hours of cell output per year, enough for about 250,000 long-range packs) needs seven to nine years to reach payback — the point where cumulative cash flows recover upfront capital cost.

If credits end before payback, the affected OEMs (Ford, GM, Stellantis and their Asian partners) absorb stranded assets: capacity that cannot recover its investment under the post-repeal regime.

What does China gain?

Beijing has used the policy whiplash in Washington to compress its export timeline. Chinese OEM overseas shipments climbed sharply through early 2025; the year-on-year jump runs in the mid-thirties percent range.

Europe absorbed the majority of those units. Mexico, Southeast Asia and the Gulf states took the balance. The longer U.S. plants operate below the 75 percent utilization threshold that separates sustainable from distressed operations, the more domestic share migrates to imports from Chinese, Korean and Japanese assemblers running at scale.

For comparison, BYD alone operates at nameplate capacity equivalent to roughly half of all U.S. light-vehicle production — a benchmark that did not exist five years ago.

What to watch next

Three calendar items will define the next phase:

• USMCA review conclusion in mid-2026, alongside the expiration of OEM-specific parts tariff exclusions
• Congressional markup of EV credit and battery sourcing language, beginning September 2025
• Q3 2025 production reports from Ford, GM and Stellantis — the first full quarter of Section 232 duty exposure

Until those data points arrive, the Forbes warning stands as forecast, not verdict. The trajectory depends on which policy lever Washington pulls next.