Shares of Polestar fell 5.7% in early trading.
The U.S. Department of Commerce did not grant Polestar authorization to sell cars under the Connected Vehicles Rule, which restricts the import and sale of cars with connected-vehicle technology linked to China beginning with the 2027 model year.
Bluetooth, Wi-Fi, cellular connectivity and some satellite communications technologies are covered under the rules based on national security concerns linked to the ability of vehicles to collect sensitive data on American owners.
The rule was adopted in January 2025 under President Joe Biden, and has been kept in place under Trump.
The action marks the latest major move from the U.S. towards banning cars manufactured and exported from China, as Washington pushes to strengthen the domestic carmaking industry.
Lawmakers have proposed legislation to tighten the restrictions further. Imports of Chinese EVs also face hefty tariffs.
The Sweden-based company, which is majority-owned by China's Geely Holding (GEELY.UL), said it will continue to sell existing Polestar 3 and Polestar 4 vehicles in the U.S. and will also provide access to its service network.
The Commerce Department did not immediately comment.
Polestar had warned as early as 2024 that the connected vehicle rules would "effectively prohibit" the automaker from selling vehicles in the United States, including cars made domestically.
"The automotive industry is entering a new phase, based on regional dynamics. Our strategy reflects that, with Europe being our largest growth engine and our plan to manufacture Polestar 7 in Europe," Polestar CEO Michael Lohscheller said.
Polestar has increasingly pivoted toward Europe as sales in the U.S. remain sluggish due to growing competitive pressures and slower consumer spending.
Only 6% of its first-quarter sales came from the United States, compared with 78% from Europe.
Polestar has struggled to turn a profit and has required repeated capital injections from its owner Geely and chairman Li Shufu.
Its shares have fallen sharply, forcing the company to carry out a reverse stock split last year to maintain its Nasdaq listing.
Ford and other automakers are scrambling to obtain U.S. government authorization to continue selling models that have been in U.S. showrooms for years, but have recently come under fire as part of the ban.
Polestar's sister brand and co-founder, Volvo Cars said in May it received an authorization, though it said it still must meet the rule's specifications across its lineup sold in the U.S. The company confirmed it needed a specific authorization because of its ownership structure.
The decision raises questions about the future of the Polestar 3, its only U.S.-manufacture model.
A Volvo spokesperson told Reuters on Thursday that production in China has not yet been halted. Volvo said it was too early to say whether Thursday's development would alter those plans.
Amid tariff pressures, Polestar has opted to refresh aging models rather than launch entirely new ones.
It expects deliveries of a new Polestar 4 variant to begin later this year, followed by a revamped of the sedan Polestar 2 in 2027.
The automaker's next fully new model, the compact Polestar 7 SUV, is slated for production at Volvo's planned factory in Slovakia.
