The Trump administration and the automotive industry

May 3, 2017

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By Rick Hanna

During his campaign, President Trump took a hardline stance against several measures that directly impact the auto industry, including trade pacts and emissions standards, and promised to invest more in infrastructure development. On par with other issues the new administration is tackling, some developments have unfolded at an accelerated pace while others have seemingly been put on the proverbial back burner. As we move past the 100-day mark of the new Trump administration, campaign issues pertaining to the automotive industry are still unfolding. Here’s a look at where we stand today on these key issues:

Trade

Having already delivered on his promise to pull out of the Trans-Pacific Partnership (TPP) within the first week of his term, President Trump has pivoted to the renegotiation of NAFTA. Several possible scenarios exist, ranging from relatively few changes to significant tariffs being added, to the tearing up of the agreement altogether (which would trigger a default to World Trade Organization agreements that would reintroduce duties on categories of goods that have crossed the borders of the US, Canada and Mexico freely for years), all with the desired outcome of shrinking the trade imbalance between the two countries and stimulating investment and job growth in the US. Mexico is currently the largest vehicle importer to the US, shipping nearly 2.2 million passenger cars and light trucks into the country in 2016, accounting for 12.6% of US sales and more than 27% of total vehicle imports. This is perhaps the most contentious matter on the Trump agenda that would have an immediate impact on the auto industry should tariffs be enacted.

Fuel economy and emissions standards

President Trump has largely taken a stance against stringent climate control and environmental regulations, and has already said he will review CAFÉ standards and will announce whether the Obama-era CAFÉ standards of 54.5 miles per gallon by 2025 for light duty vehicles will stand. This has been a welcome sign to automakers who were growing increasingly wary of the cost and potential inability to meet the standards. Automakers estimated that the cost to comply with the initial targets from 2012-2025 would be approximately $200 billion and that, even today, no conventional vehicles currently exist that would meet the 2025 standard. New EPA director Scott Pruitt has also been instructed to review the process to revoke the California CARB waiver that allowed the state to require more stringent standards than federal mandates.

Infrastructure

The deteriorating condition of roads and highways was a popular topic during the campaign, and in February 2017, President Trump proposed $1 trillion in additional public and private funds be allocated toward infrastructure improvements, along with an opportunity to invest in new technologies (road sensors, smart traffic lights, autonomous infrastructure, etc.). The administration appears to be pivoting toward a national focus on infrastructure development as opposed to a regional spending model. The current draft budget cuts funding to regional development projects and grants, but a larger bill is expected to address the promised investment.

Much is still to be determined when it comes to the Trump administration, but if the early months are any indication, policy changes, discussions and negotiations may occur at a rapid pace. Keeping updated on the latest developments will be essential to understanding the impact on the auto industry.

 

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