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Behind the scenes: Trump unsettles the auto sector

Illustration: Lazaro Gamio/Axios

Since taking office and replacing his Rolls-Royce with an armored Cadillac called "the Beast," Trump seems to have spent more time thinking about cars than any other industrial sector, per aides past and present. He's also bred uncertainty, including over whether he’ll slap tariffs on imported cars.

Why it matters: Trump wants to restore American auto manufacturing to what he considers its mid-20th-century greatness, according to aides. But his ideas for saving the industry are creating angst for its top execs.

Over many months, Axios has interviewed industry executives about Trump's policies and other sources who've discussed the auto industry with the president.

As with most relationships, it's complicated:

  • Automakers hated being used as political punching bags during the 2016 campaign — Trump berated Ford on Twitter, for example, about building cars in Mexico and often got his facts wrong.
  • After the election, they were generally pleased by Trump's attention to their issues, but not always with his actions.
  • Corporate tax reform was a welcome boost, but then his steel and aluminum tariffs wiped out much of their tax savings and drove up car prices.
  • Economists predict a sales downturn this year.

Now Trump is threatening to slap 25% tariffs on imported vehicles and car parts — which no one in the industry has asked for. As we've previously reported, most of Trump's senior economic advisers — with the notable exception of Peter Navarro — think new car tariffs are a terrible idea.

  • But Trump tells everyone who'll listen that the threat of car tariffs is his best leverage in talks with foreign leaders.

Trump's bargaining chips have expensive implications for the auto industry — and for consumers. Ford CEO James Hackett said last September that Trump's steel tariffs would cost the automaker about $1 billion in profits.

  • New tariffs would hurt auto suppliers, car dealers and U.S. factories that depend on global supply chains.
  • Toyota, which promises to spend $13 billion to expand U.S. manufacturing by 2021, warns that Trump's tariffs would raise the price of a U.S.-built Camry by $1,600.
"There are 137,000 Americans who design, build, sell and maintain American-built Toyota vehicles. They deserve to know if they’re a security threat. And consumers need to know if their costs for American-made vehicles are going to go up."
— James Lentz, CEO, Toyota Motor North America

Over the past two years, Trump has latched onto all kinds of ideas he thought would help the car industry. But the auto industry asked for almost none of them.

One backdoor move that died: making foreign car companies adhere to higher fuel economy standards than American companies.

Unwinding Obama-era fuel economy standards is popular with conservatives, but the auto industry is wary.

  • Automakers welcomed the regulatory review, saying Obama’s higher standards would be tough to meet and didn’t match consumer demands.
  • Publicly, they say they're open to gradual increases. But privately, some welcome Trump's rollback, according to several sources.
  • Now Trump is battling California over the issue, as the state fights to set its own stricter standards.
  • Automakers’ top priority is ensuring the U.S. has only one nationwide standard.

The bottom line: "There's political uncertainty everywhere you look, which is worse than any technological uncertainty because it has a chilling effect on investments," John Bozzella, president and CEO of the Association of Global Automakers, told Axios.