As clarified by his campaign, Donald Trump has claimed that the demise of the US automobile industry would be a major consequence if he is defeated in the November 2024 presidential election. The claimed reason is that President Biden’s mandate to increase electric vehicles’ share of new car sales would result in EVs made by Chinese auto companies overwhelming the US market, destroying US auto manufacturers and killing many jobs. The truth is that a Trump victory would impede the industry’s evolution during a critical time in its history and would harm consumers.
Since the 1970s, Japanese, German, Korean, and other foreign automakers have entered the US market and reduced the US automakers’ market share of new car sales from roughly 90% to their current share of about 40%. During this period, the profits of US auto manufacturers have fluctuated greatly, but the US government has stepped in to provide the industry with various forms of protection and loans to soften the periods when its profitability collapsed. According to the Bureau of Labor Statistics, more than one million workers are currently employed in motor vehicles and parts manufacturing and more than three million workers are employed in motor vehicle retail trade.
American consumers have been the major beneficiaries of the globalized US motor vehicle market because they have been able to select among a greater variety of higher quality cars and light trucks that are better aligned with their preferences for vehicle price and performance. Thus, the significant evolution of the automobile and light truck sector of the US economy during the past half century has illustrated America’s strength that its citizens are able and willing to adjust to dramatic changes brought about by a competitive global market system to improve the wellbeing of the nation as a whole.
Currently, the US auto industry is attempting to adjust to advances in technology that will eventually lead to electric vehicles comprising a large fraction of America’s vehicle fleet in the decades to come. Consistent with the adjustment that the nation has made during the past half century to improve its vehicle fleet via global competition, the best automobile firms in the world producing EVs must be allowed to compete for American consumers’ business.
However, Trump’s promise to put a 100% tariff on foreign EVs to allegedly prevent the destruction of the US auto industry has made it clear that he does not want the American consumer to choose among EVs made by the best firms in the world. Importantly, this includes the Chinese EV company Build Your Dreams, BYD, which has become the global leader in new energy vehicles—EVs and hybrids—following its evolution from a mobile phone battery manufacturer to a vertically integrated EV company that makes most of its own components. As a private company with some funding from the Chinese government as well as an investment from Warren Buffet, BYD has succeeded by offering a wide range of affordable new energy vehicles at low prices, while expanding its markets in other countries for total sales of more than three million vehicles in 2023.
US consumers, however, have been unable to benefit from the stiff competition that BYD could provide to Tesla and other US automakers because BYD has been significantly discouraged from establishing a US sales network by a 25% duty that Trump imposed on its vehicles when he was in office. Trump’s promise to increase that tariff to 100% if he returns to office guarantees that BYD will never sell its vehicles in the US for the next several years and that the US industry will not be spurred to evolve to benefit US consumers.
President Biden has been faulted by Trump as the source of his apocalyptic claims of the auto industry’s eventual destruction by imposing an EV mandate, which was just updated to outline a 31% to 44% target share for EVs of new light vehicle sales in 2030. Biden’s response to Trump in the short run has been to seize on his fearmongering of a “bloodbath,” but if he is reelected, Biden should act on his goal of slowing climate change by spurring the efficient adoption of EVs.
The nation has succeeded in reducing the fuel consumption of its vehicle fleet by allowing Japanese automakers to sell reliable fuel-efficient vehicles in the US during a time when US automakers did not offer those vehicles. Competition ensued, engine technology advanced, and overall fuel consumption and motorists’ operating costs declined for both imported and US-made vehicles.
In a second term, Biden should take constructive steps to increase the likelihood of a similar result for vehicle emissions by eliminating counterproductive tariffs, wasteful consumer subsidies, and unjustified EV market share mandates, while allowing BYD’s unfettered entry to intensify competition among automakers, thus facilitating the efficient pace of EV adoption. US auto companies would undoubtedly lose more market share unless they responded effectively to BYD’s competition. But in contrast to Trump’s claims, the US industry would not be destroyed. Foreign auto firms already account for over half of the industry’s sales and US jobs would not be killed because BYD, as have other foreign auto companies, would employ an American work force to produce and sell its vehicles.
If the auto industry is once again able to go through another adjustment to foreign competition, US auto consumers would again greatly benefit because the best EV companies in the world would be competing for their business. This is how a capitalistic system should and can work. Trump’s politicized protectionist plan to “save” the US industry by tariffs would impede its evolution, harming it and American consumers.
