THE world is watching and electric vehicle subsidies are set to cease and car imports from Mexico and Canada could potentially be taxed by 25 per cent under plans by US President Donald Trump.
The end of EV subsidies and the tariffs on EV imports from US neighbours as well as China were key platforms of the president in his election campaign.
In a press conference this week, President Trump said: “We are thinking in terms of 25 per cent on Mexico and Canada, because they are allowing vast numbers of people” into the US. “I think we will do it February 1,” he said.
He also ordered his administration to consider eliminating subsidies and other policies that favour EVs, beginning a process that, according to trade newspaper Automotive News “risks slowing adoption of EVs in the US.”
The new president has said that aid for EVs and other “ill-conceived government-imposed market distortions” would be reduced or ceased.
He stopped short of explicitly directing the Environmental Protection Agency to review or rewrite those rules, or for the Transportation Department to rework fuel-economy regulations that also were toughened under President Joe Biden. Automotive News reported that the order does, however, “specifically call for terminating waivers that allow states to limit petrol-powered car sales, indicating that Trump will look to take on California again on those grounds”.
California requires car-makers to deliver an increasing number of zero-emission vehicles every year through 2035, when all new cars sold will need to be zero-emission.
President Trump also directed agencies to pause disbursement of funds appropriated through two laws Biden signed — the Inflation Reduction Act and Infrastructure Investment and Jobs Act — including funding for EV charging stations.
The infrastructure law allocated $US7.5 billion ($A12b) to building out a network of public chargers across the country.
While he was president-elect, advisers recommended that he repeal federal policies that boost consumer demand for EVs, including the $US7500 ($A12,000) federal tax credit for plug-in car purchasers, while still fostering a domestic supply chain to produce clean vehicles.Automotive News said that while it would take an act of congress to fully rescind the consumer rebate, President Trump has authority to expand limits on which companies are eligible to receive the rebates, and make other tweaks. A legally enduring rule could take months to complete.
Meanwhile, President Trump indicated he was still considering a universal tariff on all foreign imports to the US, but said he was “not ready for that yet.”
“You would put a universal tariff on anybody doing business in the US, because they are coming in and they are stealing our wealth,” he said, adding that implementation could be “rapid”.
Automotive News also reported that European and Asian car-makers were likely to be affected by President Trump’s tariffs and that a trade war was possible.
“Trump’s plans for tariffs on two nations vital for US energy and auto imports threatens to set off a trade war among the signatories of the US-Mexico-Canada Agreement, the successor to NAFTA negotiated at Trump’s insistence during his first term,” AN said.
This agreement governed the flow of $US1.8 trillion ($A2.9t) in goods and services trade, based on 2022 data.
Canada and Mexico have said they would retaliate against American goods if the president applies tariffs.
In his press conference this week, President Trump said: “Canada is a very bad abuser” and he complained about the flow of fentanyl and migrants across the northern US border.
Automotive News reported that Bernstein analysts said in a November research note that tariffs of the 25 per cent magnitude that is proposed on the US neighbours would spell “disaster” for the US auto industry and Detroit’s car-makers.
The US imports a significant number of vehicles from Canada and Mexico. Stellantis imports about 40 per cent of the vehicles (especially Ram trucks) they sell in the US, while General Motors imports about 30 per cent and Ford Motor Co. 25 per cent, Bernstein said at the time.
Automotive News said that the additional levies would hit about $US97 billion ($A155b) worth of vehicle parts and four-million finished vehicles that come into the US from those countries and could boost average new-car prices by about $US3000 ($A4800), according to Wolfe Research.
Against the reaction to the possible tariffs on the Canadian and Mexican imports, there was some relief in Chinese markets as the president fell short of announcing immediate levies against the world’s second-largest economy.
By Neil Dowling