President Trump had a gift for the auto industry after he took office in 2017: a sharp cutback in fuel-efficiency standards.
Turns out, they didn’t want it. And now the president and the automakers he tried to help are engaged in a dysfunctional feud, involving the possible abuse of government powers by Trump.
Under President Obama, the government set aggressive new fuel-economy standards that would force vehicles to average nearly 50 miles per gallon by 2026. Automakers went along with that plan for two reasons: First, there were supposed to be periodic reviews and adjustments if the needed technology wasn’t advancing. Second, the higher federal standards would be close enough to the stringent requirements set by California to effectively create one national standard for automakers to meet, rather than separate California and federal rules.
Trump came into office determined to deregulate, and he plans to lower the Obama-era standard to 37 miles per gallon. If not for California, automakers would love that. But California has been allowed to set its own pollution standards for 50 years, due to the legacy of smog, and a dozen other states have chosen to follow the California rules. And most carmakers would rather follow one set of rules than two, even if they’re over-complying in some areas.
Making it personal
Trump has a personal beef with California and its perennially Democratic leaders, who are happy to return the animosity. So, Trump must have taken it personally when four automakers—Ford (F), Volkswagen, Honda (HMC) and BMW—made a recent deal with the state to abide by its higher fuel economy standards instead of Trump’s easier rules. Most other big automakers would probably have ended up doing the same, since it’s more efficient to build a single assembly line than multiple lines for different variants of an automobile.
A peeved Trump will now have the U.S. Department of Justice investigate the four automakers for antitrust violations, a farcical development even for the grifty Trump administration. The four automakers aren’t forming a secret pact to corner market share or gouge consumers. They’re abiding by regulatory standards the state of California has every legal right to set. It’s fair to wonder if this is the first time in history the U.S. government has launched an investigation because corporate entities are abiding by standards that are too high.
Trump signaled his displeasure in a recent tweet speculating that the founders of Ford and General Motors (GM) must be “’rolling over’ at the weakness of current car company executives.” Trump also dinged GM recently for “moving major plants to China,” as if GM now builds cars in China and ships them back to America. In reality, GM only imports one car from China to the United States. Most GM cars built in China are sold in China.
A rational president might leave the automakers alone at this point, leaving them free to choose whether to abide by lower federal standards where they can and the higher California standards where they must. But Trump has personalized his dispute with Big Auto, as he has so many other disagreements, and sent his Justice Department vigilantes out to do what they can to mend his ego. Trump also wants to end California’s right to set its own pollution standards.
The result will probably be exactly what we’ve seen many times before: Trumpian overreach, followed by years’ of lawsuits and more uncertainty for the businesses Trump is targeting. Republicans normally urge government to get out of the way. Trump is using the government at his command as a barricade.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman