During his election campaign, US President Donald Trump took a staunch, and often uncompromising stance, against several measures that directly impact the auto industry.
Three areas that have emerged at the forefront include trade pacts, emissions standards and infrastructure development. As the Trump administration’s 100-day report card continues to make news, campaign issues pertaining to the automotive industry are still unfolding.
Though the President targeted the growing trade deficit with Mexico and spoke often of imposing tariffs on imports from southern neighbours, the rhetoric has been relatively quiet in the past month. The renegotiation of NAFTA remains on the agenda, though. Many possible scenarios could transpire as a result since it relates to North American trade, ranging from minor changes and significant tariffs to the tearing up of the agreement altogether.
President Trump’s stated goal is to shrink the trade imbalance between the two countries while also stimulating investment and job growth in the US. Mexico is the largest country of origin for passenger vehicles, shipping 2.2 million passenger cars and light trucks, equating to 12.6 per cent of US sales in 2016 and making up 27 per cent of all imports.
Mexico is also, by a large margin, the largest source of vehicle parts as well, with over $52.7 billion dollars coming across the border. Any tariff imposition could have an immediate and significant impact on sales while also potentially triggering a domino effect on other markets enacting protectionist tariffs in response.
Welcome changePresident Trump’s move to ease fuel economy and CAFE standards has been a welcome change for US automotive executives who were growing increasingly wary of the cost and potential inability to meet the standards. Consumers have been increasingly favouring larger vehicles, with the sales mix at 60 per cent light truck and 40 per cent passenger car-based in 2016. Meanwhile, alternatively-fuelled vehicles (hybrids, pure electric, fuel cell etc) were a mere 2.8 per cent of US sales.
The Obama administration had instructed the Environmental Protection Agency (EPA) to finalise the 2022-25 standard despite not being mandated to do so until April 2018. Following through on his campaign promise, the administration has started legal proceedings to roll back the previous standards and, further, to revoke a waiver for California that allowed them to enforce more stringent standards than federal mandates.
Failed promisesMoreover, the President is said to be slashing nearly the entire budget for the EPA’s budget for emissions and fuel economy testing and reducing the unit’s headcount. If these cuts are indeed in the EPA’s new budget to be released in May, new vehicle testing and certifications may take much longer and face delays in bringing new products to market.
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 to be allocated towards infrastructure improvements. This included investments in new technologies like road sensors and smart traffic lights.
However, initial drafts of the President’s budget made no mention of this $1 trillion investment, which is believed to be part of a separate package. The draft budget does include funding cuts to agencies key to regional development, including public transit projects and local infrastructure grants.
As this unpredictable new era unfolds, there are still many unanswered questions about the Trump administration. If the early months are any indication, policy changes, discussions and negotiations will occur at an unprecedented pace. Thus far, it has been a virtual whirlwind of executive orders and new legislation, setting the tone for an ambitious first term. A number of Trump initiatives that have a direct impact on the automotive industry have already started to take shape, while others have fallen off the radar, at least for now.
The writer is Partner, Price Waterhouse