Driving Off a Cliff?

“They got some basic problems. They’re very expensive and they don't go far.” 
—Donald Trump at a campaign event, 2024. 

 “An unpleasant aberration that would vanish, if there was justice in heaven.”
—General Motors on the small car market, late 1960s.

Auto and auto parts production is globally the second largest manufacturing industry by employment and the highest by value of output. And with Henry Ford’s creation of the assembly line in the 1910s, the industry came to symbolize the United States as a global manufacturing power. Detroit was the “Motor City,” with a cultural impact beyond simply the number of cars produced—remember the “Motown Sound”?

There were competitors, but the U.S. auto industry was dominant well into the 1950s, when two-thirds of all globally manufactured vehicles were made in the United States. The first serious challenge to U.S. dominance came from Japan—small, convenient cars that U.S. auto executives dismissed as low quality and unreliable, insisting that U.S. car buyers really preferred the mammoth, fuel-guzzling, high-profit vehicles with new models produced each year.

By 1967 the United States moved from a net auto exporter to a net auto importer. 

Today, the global auto market produces more than 75 million new cars a year. The United States is the second largest producer but only accounts for about 11% of the total. China is the largest, accounting for one-third.

The elite of the U.S. auto industry were as blind in the 1950s–1960s as President Donald Trump is today. And despite promises to revive the industry in his 2025 inauguration address, Trump’s tariff tantrums are likely to have an even bigger negative impact on the U.S. auto industry than Japanese automakers and other competitors did back then. Trump’s auto and auto parts tariffs will leave the U.S. industry less competitive, probably reduce the demand for U.S.-made parts and accessories, and, most importantly, will leave the industry out of step with the rapidly changing auto market. 

Trump’s first attack on the U.S. auto industry was the imposition of a 25% tariff on vehicles and parts to “protect national security.” Clueless as usual, Trump did not realize that, by assembly origin, U.S. cars aren’t made in the United States, they are made in North America—the United States, Canada, and Mexico. General Motors and Ford rushed to point that out, so Mexico and Canada were granted exceptions—sort of. So then the tariff on auto parts was dropped, but the tariff on auto imports was set at 25% on “non-U.S. content.” And there is yet more: There are now tariffs on steel, aluminum, and copper, inputs that are all used in U.S. auto manufacturing, that may add as much as $2,000 to the price of a car. 

Tariffs on these inputs will not, however, be applicable to cars assembled at BMW’s San Luis Potosi plant in Mexico or to cars coming off the assembly line at Toyota’s Ontario operation.  

Confused? Wait—it gets worse. Trump agreed to a 15% tariff on Japanese—and later E.U.—auto imports, neither of which will face his tariffs on steel, aluminum, and copper. It is possible that this relatively favorable treatment may drive some production back to Germany and possibly Japan—where the companies are likely to buy fewer U.S.-made parts and accessories. 

Trump claims that his deal with Japan will open the country to U.S. cars. But Japan has not had a tariff on cars imported from the United States. The real problems for U.S. auto manufacturers seeking to sell cars in Japan are more complex. First, people in Japan drive on the left side of the road and thus are accustomed to right-side steering—very few U.S. automakers produce such cars. Second, about 40% of all cars in Japan are “keis”—very small compacts that function well on the country’s narrow and crowded streets. U.S. auto manufacturers just don’t make that type of car. 

All of the above undermines the claims from some of Trump’s minions that his tariffs are part of a grand plan for reorganizing the global structure of trade. When you drill down within individual industries, it’s clear no such plan exists. 

The above is bad enough for the U.S. auto industry, but I think a more significant, and all-to-often-glossed-over problem, is the impact of Trump and the Republican Party’s climate change denialism on the industry’s global competitive position. 

Some context: In 2016, EV sales of all types were less than 1% of total global car sales; in 2025 EVs are projected to take 25% of the new car sales, up from a little over 20% in 2024. In contrast, fossil fuel vehicle sales have been on a consistent decline globally since they peaked in 2017–2018.

Of course, the leader in this shift toward increased EV sales is China—both in domestic sales, but also through exports. Five of the top 10 EV manufacturers are Chinese companies, and BYD (Build your Dream) surpassed Tesla as the top EV manufacturer in 2024 when it produced 1.7 million battery-powered EVs and another 2.2 million plug-in hybrid EVs. (See Marie Christine Duggan, “The Monster That Government Made,” D&S, March/April 2025). Tesla and GM are the only two U.S. auto manufacturers in the top 10 EV manufacturers internationally.

But BYD is not sitting still. On July 1, 2025, the company’s first Brazilian-produced EV rolled off the assembly line in Camaçari, Bahia. The increasing number of EVs in China’s auto exports, combined with BYD’s decision to establish manufacturing in countries with relatively low numbers of cars per capita, is changing the composition of consumer auto demand. Brazil has a population of over 200 million—but only 214 cars per 1,000 people (the United States has 860 cars per 1,000 people).  

The International Energy Agency estimates that 20 million new EV vehicles will be added to the global auto fleet in 2025. That’s new territory if you produce the right product—and China is capturing it today with selling low-cost EVs—not just to Brazil but to Hong Kong, Singapore, Thailand, Nepal, and beyond. 

Faced with this accelerating shift in consumer demand and EV manufacturing costs and sales that are at or below those of fossil-fuel vehicles, what does Trump do? He ends government subsidies for EV buyers, tries to end the federal funding for expanding the country’s EV charger network, and passes legislation, the Big Billionaires Bill (also known as the One Big Beautiful Bill Act), that guts the programs designed to create a clean energy battery industry to catch up with China. 

In sum, Trump’s auto industry policies will propel the U.S. auto industry backward to a fossil-fuel world that is diminishing in size. Like the car manufacturing executives of the 1960s, Trump and his minions are demanding that the market return to a bygone era.  

Is there something that could be done differently? During his presidency, Biden, like Trump, placed a significant tariff on Chinese EVs. But Biden also sought to develop the U.S. EV industry through the measures outlined above, which Trump recently repealed. Here is a long-shot, and probably politically dead, idea. What about going to BYD with the following proposal: You can enter the U.S. car market if you build a new assembly plant in the United States and remain neutral in any efforts to unionize your workers. 

Would it work? I don’t know, but something like this would be superior, in both the short and long run, to condemning the U.S. auto industry to the dustbin of history.