Implications for Employment, the Automotive Sector, and American Manufacturing

• Trump pledges heavy tariffs against China and Mexico, might eliminate federal support for U.S. EV plants
• U.S. auto industry has gained tens of thousands of jobs since 2019, prior to COVID
• Criticism of electric vehicles (EVs) might be mere rhetoric, but its inclusion in the MAGA platform could be significant
• A return to a first-term scenario: A coal lobbyist leads the EPA, limited EV tax credits, and halted mpg penalties

Once a Tesla Model S owner, former President Donald Trump has made numerous negative remarks about electric vehicles during this year’s campaign as he heads toward the 2024 elections.

Nevertheless, he has support from within the electric vehicle industry. In July, Tesla CEO Elon Musk endorsed Trump for the presidency. Trump returned the favor in August, calling Musk “a brilliant guy” and suggesting he might consider appointing him to a position in his administration.

Trump may view Musk, who has effectively built a global EV manufacturer, as a potential collaborator in a future government role—possibly overseeing a commission focused on improving government efficiency.

This admiration may stem from Musk’s significant job cuts at X (formerly Twitter) and his near termination of the entire Supercharger team at Tesla earlier this year, prompting Trump to label Musk as “the greatest cutter.”

However, this has led some to question Trump’s true stance on the future of the electric vehicle sector. With often conflicting statements and actions, what does a second Trump presidency truly signify for EVs?

Trump’s Past Statements and Actions on EVs

During Trump’s first term, major automakers in the U.S. and Europe began shifting away from initial compliance vehicles to more serious long-range electric options. At the same time, many Chinese manufacturers transitioned to electric vehicles, with China openly fostering strong global automakers and developing an infrastructure to support clean energy.

Trump has lacked a clear stance on clean energy, transportation, or the automobile sector, unlike President Joe Biden and Vice President Kamala Harris. He has often claimed there is a “much smaller market” for EVs and plug-in hybrids than projected, citing their cost and limited range. He has publicly criticized major manufacturers like GM for their plans to transition fully to electric, asserting that such a strategy “will not work.”

In late 2019, Trump effectively terminated an extension of the tax credit for Tesla and GM, both of which had reached the limit of 200,000 vehicles under the old system. His administration also froze penalties for fleet fuel economy violations after losing a court ruling in an attempt to revert those fines, which likely further stifled the electric vehicle market.

There has been no significant shift towards a clean-energy economy. In July, Trump allegedly sought $1 billion in campaign contributions from oil and gas executives in exchange for repealing policies supporting electric vehicles, ceasing wind energy expansion, and undermining other clean energy initiatives opposed by the industry.

However, the oil sector’s response was reportedly less enthusiastic than Trump had hoped. If he viewed the industry through the lens of decades past, he might be surprised to learn that it’s now multifaceted; today’s diverse energy companies have heavily invested in solar, energy storage, and charging infrastructure, alongside traditional fossil fuels.

Trump’s Promise of Tariffs on China and Mexico

One consistent stance from Trump is his commitment to imposing tariffs. In March, he pledged a 100% tariff on cars produced in Mexico that contain Chinese components, regardless of whether they are electric. He also stated that if Chinese manufacturers establish operations in the U.S., they “can’t send Chinese workers over here.”

Since then, the Biden administration has implemented significant tariff increases on Chinese electric vehicles, batteries, steel, and more—including a 100% tariff on EVs, excluding gas-powered vehicles. Following suit, Canada applied a similar 100% tariff on Chinese-made EVs, labeling them an “extraordinary threat.”

Beyond China, Trump emphasized that his administration will adopt measures to “punish” companies outsourcing jobs to Mexico—suggesting he may push for the dismantling of what was previously known as NAFTA. Over the last three decades, companies have relocated to Mexico to capitalize on lower labor costs for the production of vehicles and parts for the U.S. consumer market.

Jobs: Will Trump Preserve Biden’s Gains?

To assess Trump’s past impact on the auto industry, it’s important to look at job data. Research from Harvard University indicates that roughly 75,000 manufacturing positions vanished during Trump’s presidency.

Trump has frequently asserted that auto manufacturing and sales reached unprecedented levels during his administration. Although data from the U.S. Bureau of Labor Statistics shows a slight rise in motor vehicle manufacturing jobs during that time, it also indicates that the overall trend had begun to plateau following a robust recovery that started after the 2008-2010 auto industry crisis.

Recent statistics do not favor the Harris campaign either. Just last week, the same agency reported a sharp decline in manufacturing jobs, with 24,000 lost in August. However, it’s uncertain how many of those losses were tied specifically to the automotive sector.

In terms of annual averages, data from the government cited approximately 993,500 jobs in the auto industry in 2019, the last full year before COVID-19, referred to by Trump as “the China Virus.” In 2023, this figure has risen to 1,040,500 and is expected to increase further in 2024.

While China made significant strides in the automotive and electric vehicle sectors during Trump’s presidency, the Biden administration has taken measures to catch up; a March analysis by EDF highlighted that U.S. investments in EV manufacturing have surpassed those in China from 2021 to now.

Per a recent report by the Environmental Defense Fund (EDF) coinciding with the second anniversary of the Inflation Reduction Act’s passage, U.S. investments in electric vehicle manufacturing have totaled $199 billion, with 63% occurring since the introduction of the 2022 legislation. This has created 201,900 jobs related to EVs, and generated a total of 931,000 jobs throughout the economy.

Notably, these investments have not all been earmarked for new facilities. In July, the DOE announced a $1.7 billion allocation to revitalize or convert 11 closed or at-risk auto manufacturing plants spread across eight states.

According to Climate Power, policies from the Biden administration have unlocked tens of thousands of jobs beyond just automakers and battery manufacturers, including a $100 million allocation for small and medium-sized auto parts suppliers enabled by the Infrastructure Law.

Climate Change: A Focus on Drilling

Trump has long made climate change denial a cornerstone of his policies. He promised to rejuvenate the coal industry and has suggested that climate change is a fictitious fabrication by China intended to undermine American businesses.

If reelected, Trump could appoint another coal lobbyist to lead the EPA, potentially making it more susceptible to legal challenges regarding its authority to regulate electric vehicles under fleet emissions standards.

While coal may not be a primary focus for Trump’s 2024 campaign, experts suggest a return to power could result in regulations that enable coal plants to continue operating for longer. Recently, Trump has criticized the land requirements for solar farms and expressed disdain for wind power, at times echoing misinformation from opposing groups. He has even claimed that offshore wind farms drive whales “crazy” and result in fatalities—prompting NOAA experts to clarify that there is “no scientific evidence” supporting this claim.

However, public opinion is shifting. Trump will need to pay attention to growing support for climate-focused policies, even among his own party’s constituents. A December 2023 CNN poll revealed that nearly two-thirds of Americans are concerned about climate change, with 73% backing climate initiatives. The same survey found that half of Republicans favor federal policies aimed at halving greenhouse gas emissions by 2030.

This contrasts sharply with Congressional actions by the Republican party; nevertheless, it may compel significant adjustments as Baby Boomers continue to create policy while younger generations gain economic influence. Last year, House Republicans made a symbolic vote to dismantle the Clean Air Act and supported various lawsuits challenging the EPA and the Department of Transportation on pollution regulations. Another confrontation regarding California’s policies may be on the horizon.

A study from Climate Power, updated in August, highlighted that approximately 334,565 jobs could be jeopardized by a potential Trump administration aligning with Big Oil interests.

Recent data from the Department of Energy’s Energy and Employment report indicates that clean energy jobs grew at double the overall job growth rate in 2023. Around 75% of these positions do not require a four-year degree, and according to Brookings Institution data, clean energy roles may see an income increase of 8-19%.

Climate Power estimates that about 134,000 of these jobs are located in low-income areas, with around 52,000 in rural settings. Two-thirds of these roles are linked to batteries, wind, solar, and grids—potentially making them targets should Trump return to office.

The EV Tax Credit Faces Uncertainty

On August 19, Trump stated he would contemplate eliminating the $7,500 EV tax credit, although he noted “no final decisions have been made,” as reported by Reuters. He emphasized that “tax credits and tax incentives are generally not considered favorable.”

During his presidency, Trump attempted to abolish the EV tax credit or allow it to expire, but he lacked congressional support—something that may be necessary to roll back aspects like the EV leasing loophole that provides subsidies for imported vehicles and luxury electric leases.

Turning Red on the Future of EVs

Trump’s intention to reverse Biden’s electric vehicle policies may be particularly unfavorable for states in the Southeast, which have reaped the benefits of the push to manufacture EVs and grow the associated supply chain.

As noted by EDF, 84% of announced investments in the EV sector are concentrated in ten states, ranging from Detroit, the historical hub of the auto industry, to states near Atlanta, including Georgia, North Carolina, South Carolina, Tennessee, Kentucky, Ohio, Illinois, Indiana, Michigan, and Nevada. Climate Power also identifies Texas as a major investment center.

By 2027, U.S. facilities are expected to produce 5.8 million new EVs annually, accounting for approximately 36% of all vehicles manufactured in 2023, with many of these vehicles set for export.

What Would Happen to the U.S. EV Transition If Trump Wins?

If Trump secures a second term, the flow of investments from the IRA is unlikely to cease immediately; Republican leaders in states benefiting from billions in EV development will not simply conform to Trump’s directives. They are unlikely to decline approved federal investments in their states. Instead, a second term for Trump may lead to a gradual reduction of federal support programs initiated by the infrastructure bill and IRA, with Republican governors striving to maintain some benefits while rebranding the remaining funding.

Mike Murphy, a Republican strategist who has analyzed Republican attitudes toward EVs, is involved in initiatives to steer Republicans back towards supporting electric vehicles. His recent campaign in Michigan emphasizes the job creation aspect.

Murphy clarifies that without Congressional assistance—likely requiring a significant Republican majority aligned with Trump—nothing can be done regarding ongoing policies like tax incentives or the substantial manufacturing expenditures tied to the infrastructure bill. However, it could signal a slow decline in the most robust jobs within the future-focused auto industry.

“He may attempt to repeal certain policies, which could spark a significant Congressional conflict,” Murphy observed. He noted that some Republican governors, whose states have greatly benefited from existing policies, might resist efforts to dismantle them.

More plausibly, a Trump administration may simply obstruct progress.

“While much funding has already been allocated, as an administration, you control staffing,” he explained. “Personnel in the Departments of Energy and Transportation who review and approve grants could be filled with individuals opposed to these policies, leading to stagnation which is not uncommon in policy debates.”

In such a scenario, applications for National Electric Vehicle Infrastructure (NEVI) funding for Biden’s national EV charging network might pile up and remain unaddressed.

Murphy also pointed out that California’s electric vehicle mandate, instituted by outgoing Governor Gavin Newsom, could become a contentious issue in upcoming elections.

Moreover, Trump’s inclination to diminish the EPA’s influence might inadvertently hinder automakers’ global competitiveness, especially against rivals like China.

The MAGA EV “Poison Pill”

This leads us back to Elon Musk, who has been suggested as a potential member of a future Trump administration.

Musk, the CEO of a company that has greatly benefited from EV tax credits and Biden’s policies, has previously been accused by Trump of making all EVs in China, while overlooking the fact that Tesla produces a significant number of its vehicles in the U.S. for export.

Murphy finds the polling on Musk particularly interesting, noting that although Musk leads the world’s foremost electric vehicle manufacturer, he is perceived positively by EV skeptics on the right.

“He could serve as an opening to change Republican perspectives on EVs, essential for reaching a 50% adoption rate,” Murphy remarked.

In recent years, Musk has questioned the necessity of EV subsidies and stated that he is not in favor of them. Murphy compares this to when Philip Morris successfully advocated against tobacco advertising despite dominating the market.

As of 2023, Tesla maintained over 55% of the U.S. EV market, though it is gradually losing market share. Despite this loss, Tesla is still reliant on subsidies for revenue, particularly through carbon credit trading in Europe.

Musk’s recent controversial comments have tarnished his image as an EV pioneer, especially due to his statements on X, which has attracted far-right users and amplified his views on citizenship, rights, and gender equality. Following Musk’s acquisition of X, Tesla’s sales in California have seen a notable decline. Data suggests that many former Tesla enthusiasts have opted to switch brands due to Musk’s political stances.

A recent marketing analysis by Caliber revealed that Tesla’s “consideration score” plummeted to less than half of its high in November 2021, citing Musk’s reputation as a significant factor. Furthermore, polling data from CivicScience indicated that public perception of Musk has directly influenced vehicle purchasing decisions, with many potential buyers choosing not to purchase a Tesla due to Musk’s views, compared to those who would buy one because of his influence.

In June, Tesla’s shareholders approved a massive pay package for Musk projected to be worth $56 billion.

Given Musk’s involvement and his social-media interactions with Trump, the latter may decide to temper his rhetoric. Alternatively, he might not.

Given Trump’s transactional nature, Murphy suggests that his rhetoric may not always translate to policy, and suspects some of the criticism of EVs may be exaggerated.

“The danger lies in Trump amplifying negative sentiments regarding EVs, potentially deterring a substantial portion of the market from buying them,” Murphy warned. In such a scenario, Musk might find it difficult to find allies.

Murphy recently conducted a poll among American households with incomes of $50,000 or higher—encompassing nearly all potential new car buyers and two-thirds of the electorate during presidential elections. Of that group, 40% identified as Republican, 36% as Democrat, and over 20% as independent.

“Thus, Trump could continue to inflame these sentiments,” he concluded. “That could spell trouble for anyone wanting to design and sell electric vehicles in North America.”

The Choice: An EV Economy or an ICE Economy?

If Trump follows a similar strategy as before, we may see the elimination or minimization of policies promoting EVs, coupled with rhetoric that discourages and disincentivizes electric vehicle adoption.

Despite assertions regarding imports and exports, this could result in a relocation of EV manufacturing overseas.

Green Car Reports has endeavored to gather responses from executives about whether Trump’s policies could yield lower vehicle prices, as claimed in prior campaigns. However, many executives have described this notion as unrealistic, noting there is currently no contingency plan if manufacturing locations must be altered again.

At the same time, there is a consensus among industry leaders that the internal combustion engine (ICE) market is clearly a legacy sector—it’s not a question of whether gasoline vehicle sales will be phased out, but rather when. If states lose access to IRA funding and factories prepared to ramp up EV production close down, what motivation would automakers have to invest substantial amounts in retrofitting them for a few years of ICE production?

Consequently, under a Trump administration, manufacturers may find themselves in a challenging and inefficient scenario where shifting back to making internal combustion vehicles becomes too costly and challenging, while simultaneously facing difficulties importing various vehicle types.

Will Trump’s approach lead to more affordable vehicles and broader choices, or will it initiate instability in the industry with unpredictable price shifts?

The outcome may ultimately depend on how well Trump balances the desires of his political base with the preferences of advisors and a cabinet unwilling to “fire” themselves.

Although Vice President Harris’s dedication to Biden’s manufacturing-oriented clean energy policies remains uncertain, Americans face a choice. This choice is increasingly reflective of two distinct economies that could not be more contrasting.