Mercedes Mullins
In 2021, 17 of the world's largest carmakers, including BMW, Ford, Honda, and Volkswagen, urged Trump to compromise on his plan to weaken fuel efficiency standards. Trump's proposal would freeze mileage standards at 37 miles per gallon, revoke California's waiver to set its own standards, and increase greenhouse gas emissions. This has sparked a bizarre fight between Trump and automakers, with Trump criticizing car companies for wanting to build more expensive, less safe, and less efficient cars. The car companies, on the other hand, are concerned about the impact of separate fuel economy standards in California and other states. Trump's administration has also imposed 25% tariffs on imported vehicles, causing disruptions in the auto industry, including factory shutdowns and layoffs.
| Characteristics | Values |
|---|---|
| Date | August 2018 |
| Car companies involved | BMW, Ford, Honda, Volkswagen, Fiat Chrysler Automobiles, Ferrari |
| Proposal | To freeze mileage standards at 37 miles per gallon and revoke California's waiver to set its own standards under the Clean Air Act |
| Impact | Slowing innovation, allowing more climate and health-harming pollution |
| Trump's response | Decrying Ford and General Motors, invoking Henry Ford and Alfred P. Sloan, and rebuking California's separate emissions standards |
| Tariffs | 25% on imported vehicles |
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What You'll Learn
Trump's plan to freeze mileage standards at 37 mpg
On his first day in office, President Trump issued executive orders attacking the nation's clean vehicle pollution standards, including California's Clean Air Act, which allowed the state to set its own vehicle emission standards. This was followed by a draft plan to freeze mileage standards at around 37 miles per gallon, revoking California's waiver to set its own standards.
The proposal was an attempt to ease the burden on car companies, which had argued that the Obama-era standards of achieving an average of 54 miles per gallon by 2025 would make cars too expensive. Trump's plan aimed to freeze fuel efficiency standards just above where they were at the time, at 37 miles per gallon. This decision was influenced by his criticism of California's commitment to the stricter Obama-era goals, which he believed would hurt the automotive industry.
However, California's influence in the global car market, coupled with agreements with Ford, Volkswagen, Honda, and BMW, posed a significant challenge to Trump's plan. These companies collectively represented about 30 percent of the global car market, and their commitment to increasing fuel efficiency and reducing emissions put pressure on the administration to reconsider.
Trump's proposal faced opposition from various quarters, including environmental advocates and the auto industry itself. Environmentalists argued that the plan would undermine investments, jobs, and affordability for electric vehicles while increasing climate and health-harming pollution. The auto industry, represented by 17 of the world's largest carmakers, sought a compromise, expressing concerns about designing cars for two separate US markets and the potential slowdown in innovation.
In response to the backlash and the potential for legal challenges from states with tougher standards, the White House eventually walked back its decision to freeze fuel efficiency standards. Instead, the new plan is expected to involve a 1.5 percent annual increase in fuel efficiency, taking into account both gas mileage and emissions reductions.
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Revoking California's waiver to set its own standards
On his first day in office, President Trump issued an executive order attacking California's Clean Air Act legal authority to set its own vehicle emission standards. The order also targeted policies that support manufacturing jobs and help make clean vehicles an affordable choice for consumers.
The Trump administration's draft plan aimed to freeze mileage standards at around 37 miles per gallon and revoke California's waiver to set its own standards under the Clean Air Act. This would effectively force California and the 13 other states that have adopted its tougher standards to conform to federal standards. Car makers have expressed concern about having to design cars for two separate US markets.
California had received a federal waiver under the 1970 Clean Air Act from the Biden administration to impose a stricter automobile emissions standard than the one set by the federal government. Under that waiver, California enacted a plan to require all new cars sold in the state by 2035 to be free of emissions of greenhouse gases like carbon dioxide, a significant contributor to climate change. This policy is designed to shift the auto industry towards electric cars, making it a prime target for elimination by the Trump administration.
Trump's executive order has been criticised for undermining investments, jobs, and affordability for electric vehicles, while also allowing more climate and health-harming pollution into the air. According to the Environmental Defense Fund, the US has attracted almost four times as much investment in electric vehicle-related industries in the past three years as in the previous five years, outpacing other regions. By putting a halt to these investments, Trump's order could allow other nations to pull ahead in the electric vehicle market.
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The auto industry's reaction to Trump's tariffs
In March 2025, US President Donald Trump imposed a 25% tariff on all imported vehicles entering the United States, a move he described as "very exciting" for domestic manufacturing. The tariffs were aimed at incentivising car manufacturers to establish more production facilities within US borders.
Trump's tariffs caused a mixed reaction among Michigan autoworkers. While some supported the tariffs, others believed that an abrupt, full-scale tariff war would "not be good for anyone because middle America is going to suffer". There were also concerns about the potential fallout of the tariffs, with industry experts warning that they could lead to higher prices for consumers, reduced consumer choices, and potential job market disruptions.
The tariffs also caused uncertainty and confusion in the financial markets, with some economists warning of a possible recession. Trump's statement that he might temporarily exempt the auto industry from the tariffs hinted at another round of reversals on tariffs, as he sought to limit the economic and political blowback from his policies.
The impact of the tariffs was felt globally, with Asian equities rallying in relief as Trump hinted at flexibility with his trade policies. The tariffs also impacted the gun and craft brewery industries, with US gunmakers struggling to adapt to the uncertain tariff threats and Canadian aluminium prices increasing, threatening Michigan's craft brewery industry.
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The impact of Trump's tariffs on car companies
US President Donald Trump's tariffs on car companies have had a significant impact on the industry, causing uncertainty and affecting global markets. Trump imposed a 25% tariff on auto imports, including cars, SUVs, and light trucks, with the aim of boosting domestic manufacturing and encouraging consumers to buy American-made products.
One of the immediate impacts of these tariffs has been the potential increase in car prices for consumers. Industry experts predict a rise in prices for both manufacturers and customers, with estimates ranging from $3,500 to $12,000 or more per vehicle, depending on the model. This, in turn, could lead to a decrease in car sales as potential buyers are priced out of the market. A similar situation occurred in 2021 when a computer chip shortage led to deep cuts in car production and soaring prices for new and used cars.
The tariffs have also caused a sense of uncertainty and confusion, with Trump considering pausing or reversing his auto tariffs to give carmakers time to adjust their supply chains. This has been a concern for car companies, who need time to relocate production and adjust to the new tariffs. Major car companies like Nissan are considering moving some of their production to the US to mitigate the impact of the tariffs, showing that Trump's policies could have some success in encouraging domestic manufacturing.
Trump's tariffs on car companies have also impacted international relations and trade negotiations. The European Union, for example, collects a 10% duty on vehicle imports, higher than the previous US passenger car tariff rate of 2.5%. Trump's tariffs have escalated trade tensions, particularly with China, a major exporter of technology and automobiles.
Overall, Trump's tariffs on car companies have caused a mix of impacts, from potential price increases for consumers and manufacturers to uncertainty in the industry and global markets. While some companies are adjusting their production strategies to mitigate the impact, the full effects of these tariffs may take time to materialize.
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The future of vehicle fuel efficiency standards
The Trump administration's approach to vehicle fuel efficiency standards is part of a broader trend of fluctuations in policies across different presidential administrations. The initial introduction of the CAFE (Corporate Average Fuel Economy) standards in the 1970s was a response to the oil crisis, aiming to improve fuel economy and reduce dependence on oil imports. While these standards have had a positive impact on fuel efficiency and energy savings, they have also faced criticism and experienced rollbacks.
In 2017, Trump announced his intention to roll back the standards, arguing that it would make car manufacturing in America more feasible. This decision was met with resistance from some automakers, with Ford and General Motors being called out by Trump for their opposition. The back-and-forth nature of the debate has created a challenging environment for carmakers, who are faced with the possibility of having to comply with varying standards across different states and countries.
The impact of Trump's tariffs and policies on the auto industry has been significant. Car companies have halted shipments to the United States, shut down factories in Canada and Mexico, and laid off workers. There are concerns that these actions could lead to higher car prices and widespread layoffs if they continue. Additionally, Trump's executive orders attacking vehicle pollution standards have been criticized for potentially harming the economy, jobs, and affordable choices for consumers, especially in the growing electric vehicle market.
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Frequently asked questions
In 2021, 17 of the world's largest carmakers asked Trump to compromise on his plan to weaken fuel efficiency standards. These included BMW, Ford, Honda, and Volkswagen. Every major automaker except Fiat Chrysler Automobiles and Ferrari was on the list.
Trump's plan included freezing mileage standards at around 37 miles per gallon and revoking California's waiver to set its own standards under the Clean Air Act.
Trump's plan was criticized by many, including the Safe Climate Campaign of the Center for Auto Safety and the Environmental Defense Fund. It was also opposed by California and 13 other states that had adopted tougher standards.
Trump's plan caused uncertainty and confusion, with carmakers facing the challenge of designing cars for two separate US markets. It also led to a decline in car imports and the idling of factories, prompting companies to lay off workers.
