Shortly after President Donald Trump was elected in 2016, he made a proposition to the CEOs of the three largest U.S.-based automakers at a White House meeting: I’ll cut taxes and regulations, and you increase jobs and investment. He made good on the tax and regulatory cuts, handing corporate America hundreds of billions of dollars in tax breaks and repealing Obama-era fuel-economy rules, though that rollback has fractured the industry. For all of the policy moves he made, there’s little evidence so far that the trajectory of the industry and its job growth changed markedly — even before the pandemic.
On the campaign trail, Trump tells voters he “saved” the auto industry by ripping up old trade deals and renegotiating new ones.
“You better vote for me. I got you so many damn car plants,” he told supporters last month at a rally in Midland, Michigan.
Democratic presidential contender Joe Biden claimed the administration’s policies have hurt U.S. manufacturers in a Oct. 12 speech to autoworkers in Toledo, Ohio. “We’re in a manufacturing recession because of Donald Trump.”
The biggest impact of Trump’s tenure has also been the most unexpected: an onslaught of tariffs, real and threatened, that sent ripples throughout the automotive-supply chain and are likely to reverberate for years to come, no matter who is in the White House.
The administration’s bluster led to a new trade pact with Canada and Mexico that replaced the quarter-century-old NAFTA and has begun to shape investment decisions across the region. And while a trade war with China hasn’t yielded tangible results, a more bellicose stance toward the ascendant Asian superpower is likely to remain a key pillar of U.S. foreign policy.
It’s too early to measure the long-term impact of the president’s policies, but it’s clear that virus-related shutdowns, which triggered a 20% plunge in auto production this year, have wiped out the automotive-related job growth during his tenure.
The number of Americans employed making vehicles and parts declined 3.9% because of the COVID-19 pandemic, from 956,000 in January 2017 when Trump took office to about 919,000 as of September, according to the Bureau of Labor Statistics. Before virus-related shutdowns cut vehicle sales, employment had risen by roughly the same amount, to 994,000.
“It would be fair to say the Trump record for the auto industry is mixed,” said Kristin Dziczek, vice president of industry, labor and economics for the Center for Automotive Research in Ann Arbor, Michigan. “He’s created a focus, a goal of there being greater U.S. production of vehicles. I don’t know that the data bears that out.”
There are 200 more factories — including auto-parts and vehicle-assembly plants — in the U.S. since he became president, though that trend started in 2012 when the industry, aided by federal bailouts, began to rebound from the Great Recession. The total includes a wide swath of transportation manufacturers that goes beyond passenger-car makers.
The reality is any president’s influence over the decision to build an auto-assembly plant is limited. While they make for great scenery on the campaign trail, multibillion-dollar factories are driven by consumer demand and investment plans that span decades, not a single presidential term.
Still, Trump, who courted auto executives by inviting them to the White House, then berated them on Twitter when their decisions displeased him, managed to change industry behavior, Dziczek said.
“I don’t recall any other president being that micro-directive about what a company does or does not do,” she said. “I think he changed the way auto companies make announcements,” if not the announcements themselves.
One of the most memorable moments of Trump-era automotive politics came in January 2017, when Ford Motor Co. scrapped plans for a $1.6 billion small-car factory in Mexico that was already under construction. Then-Chief Executive Officer Mark Fields credited “the pro-growth policies” of President-elect Trump for the decision. He later said Ford would have made the move regardless, because shifting U.S. consumer tastes meant there was less need to add small-car manufacturing capacity.
Trump also targeted Japan’s Toyota Motor Corp. for building more cars in Mexico. Shortly thereafter, the automaker said it would invest $10 billion in the U.S., and months later it unveiled plans for a new factory built jointly with Mazda in Alabama.
By the same token, General Motors’ 2018 decision to close its Lordstown, Ohio, assembly plant as part of layoffs affecting 14,000 workers in North America was a devastating blow, both for the rustbelt community of 3,200 and Trump’s jobs record. In June, Vice President Mike Pence visited the Lordstown plant, now occupied by an electric-truck startup that employs a tiny fraction of the workers GM did. He touted the completion of the U.S.-Mexico-Canada Agreement, or USMCA, as a game-changing law that will stop auto jobs from leaving the country.“The incentive that was in NAFTA to move jobs south of the border — that’s all gone,” he said. “We’re going to keep automotive jobs growing right here in Ohio and right here across the United States.”
‘No. 1 accomplishment’
The agreement, which raised regional content requirements and labor standards for cars to trade duty-free, is “the No. 1 accomplishment for this administration for this industry,” said Ann Wilson, senior vice president of government affairs at the Motor and Equipment Manufacturers Association, which represents auto suppliers.
But while industry leaders laud the stability USMCA created, they’re cautious on whether it will create more auto jobs in the U.S. “The next couple years will tell whether these provisions helped meet that objective,” Wilson said.
Whatever the Trump administration’s manufacturing achievements, they came at the expense of a costly trade war that forced companies to operate amid chaos and uncertainty. Ford and GM lost at least $1 billion each absorbing the effects of steel and aluminum tariffs on metals costs. Off-road vehicle manufacturer Polaris, which relies on cheap Chinese parts to keep its assembly plants running in the U.S., says Trump’s policies were a wash financially, though deregulation was “incredibly helpful.”
“The lower tax rate saved us about $70 million,” said CEO Scott Wine. However, “Almost all of that tax benefit was offset by tariffs.” Polaris is lobbying Congress for an exemption of the tariff on Chinese goods.
Passing on costs
Harold Weaver, president of a metal stamping company in Gadsden, Alabama, says the trade war with China actually brought him new business, albeit indirectly. Weaver, whose company, Stamped Products Inc., supplies metal parts for Hyundai, Kia, Honda and Mercedes vehicles, says foreign automakers preemptively moved parts work to the U.S. out of concern their home countries could face similar tariffs.
“When he came in and started putting those tariffs on, we started doing work that we’d never had the opportunity to look at because they were imported.”
Weaver didn’t mind the steel tariffs because he was able to pass on the cost to automakers and their customers.
A reset of trade relations with China is the Trump administration’s other big achievement, even if tangible results are still elusive, industry observers say. U.S. trade deals needed to be reworked, because they’re stuck in a post-World War II era when Europe was rebuilding its economy and China wasn’t the biggest car market in the world, said Xavier Mosquet, senior partner at the Boston Consulting Group in Detroit.
“Whether it’s a Biden administration or a Trump administration, I think it should be part of the U.S. policy,” Mosquet said. “Once we pay the cost of entry, it would be good to go to the end, and not waste this effort that has been taken.”