Customer Logins
Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Customer LoginsTrump's First Day: New Insights for the Auto Industry
The S&P Global Mobility AutoIntelligence service provides daily analysis of global automotive news and events. We deliver timely context and impactful analysis for navigating the fast-moving industry. Behind the Headlines offers a bi-weekly dive into recent top stories.
On Jan 20, 2025, President Donald Trump took office and began his second term. While more change is expected to come, and at a rapid clip, President Trump's inaugural speech and first executive orders affecting the US and North American auto industry do not vary widely from our earlier expectations. At a broad level, these issues will directly affect the US auto industry:
- The perception of an existential threat from mainland Chinese automakers and technology companies;
- Positions on environmental policy, particularly as relates to vehicle emissions, infrastructure spending and safety regulations;
- Trade policy as it relates to both USMCA and potential for national security tariffs
President Trump has announced the priorities for his agenda, with most elements echoing issues defined on the campaign trail. Specifically, the America First Priorities, as the Trump Administration calls a series of policy changes, will directly impact the auto industry.
However, it should be noted that much of the detail is still outstanding and uncertain. S&P Global Mobility still advises that a scenario mindset remains critical for decision-making. Decisions need to consider business and market demand issues in the context of upper and lower bounds derived from plausible scenarios, along with a baseline forecast.
America First Priorities
President Trump's America First priorities are batched into four areas:
- Make America Safe Again
- Make America Affordable and Energy Dominant Again
- Drain the Swamp, a reference to moving toward a leaner government with less waste
- Bring Back American Values
Many of the initiatives do not directly affect the automotive industry, though a handful certainly do. The Make America Safe Again priorities affect immigration and law-enforcement issues. Under Make America Affordable and Energy Dominant Again are the Trump Administration policies most likely to affect the auto industry.
In this area, the President aims to reverse previous President Joe Biden's efforts to control or reduce drilling for oil as well as other efforts affecting energy production. Among the priorities are that "President Trump's energy actions empower consumer choice in vehicles, showerheads, toilets, washing machines, lightbulbs and dishwashers."
That policy point supports easing vehicle emissions and fuel economy regulations. Though largely aimed at drilling and other energy issues, under this section a key priority is to end "Biden's policies of climate extremism."
While stated in the context of regulations around energy production and use, it will also affect policies impacting the auto industry. The incoming President has already issued the executive order to withdraw the US from the Paris Climate Accord. Withdrawing from the Paris Climate Accord will change what environmental targets the US sets for itself and will end its participation in a treaty which looks to reduce global warming.
Issues under the Make America Affordable category which will have an impact on the US auto industry, among other industries, include an "America First Trade Policy." The White House says "America will no longer be beholden to foreign organizations for national tax policy, which punishes American business."
During his inauguration speech, President Trump said he will create an External Revenue Service "to collect all tariffs, duties and revenues. It will be massive amounts of money pouring into our Treasury coming from foreign sources."
At time of writing, the logistics and details of the new trade policies are not clear, but tariffs will be part of the process. As we have noted previously, those will increase the cost of goods and of manufacturing within the US and will impact global sourcing strategies.
Under the "Drain the Swamp" priorities, President Trump aims to reform and improve government bureaucracy and promises to "pause burdensome and radical regulation not yet in effect that Biden announced."
President Trump also signed an executive order freezing all legislation not yet published in the Federal Register, pending his administration's review, fulfilling the promise in the speech to block items which the Biden Administration was pursuing. Further, reducing regulations and bureaucracy could impact the agencies which oversee regulations the US auto industry works under.
S&P Global Mobility expectations
Many of the assumptions we held prior to President Trump taking office hold were evidenced in the inauguration speech and executive orders signed on January 20, 2025. A dominant trait of the new White House Administration will be speed, and pressure to rethink how things are done to make sure change happens faster.
The Administration will challenge old norms and assumptions. Under President Trump's first term, he pushed for legislative and executive order changes to happen more quickly and made decisions more quickly than most previous presidents. That trait will be accentuated with the second term.
Executive branch agencies will be pushed to speed processes and reach conclusions faster, to be more efficient and reduce bureaucracy. For the auto industry, the Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) may develop rule-making proposals much more quickly.
There are some legally defined provisions for getting public feedback which may not be able to be shortened, but the agencies can be pushed to develop analysis and proposals faster. And it should not be presumed that it is impossible to change some of the procedural requirements.
Federal emissions and fuel economy regulations
Though the speed of change demanded by this Administration may challenge current procedural requirements for some developing and implementing laws and processes, there are also required review periods which may not change. As we noted in earlier reports, we do not expect that the rule that emissions and fuel economy requirements must be finalized 18 months prior to the model year start will change.
As of January 2025, NHTSA corporate average fuel economy standards could be frozen at 2027 model-year levels, rather than a change being issued to lower 2028 model year regulations. We would expect the EPA to adjust emission standards for 2027 model year to a lower level, mirroring NHTSA guidelines.
Current EPA greenhouse gas (GHG) emissions and NHTSA fuel economy regulations for light vehicles run through 2032; these are separate sets of regulations. These regulations are not aligned, making it difficult for automakers to meet both standards. If the gap between the GHG and NHTSA standards were closed, then the federal regulations would not align with California.
For the medium- and heavy-duty commercial vehicle sector (MHCV), the EPA has mandated GHG emission standards (Phase 3) starting in 2027 model year, going through 2032 model year. MHCVs are not subject to fuel economy regulations under NHTSA.
S&P Global Mobility's latest assumptions are that automakers will not physically be able to comply with the later years of the federal regulations as written today. Change is necessary to realistically align regulations with what is technologically feasible, with what consumer demand is for electrification technology, and with what is profitable at a price point consumers are willing to pay, and to accomplish those factors within the defined timeframe.
As President Trump has taken office, the shape of his administration's changes is not yet known. Other potential outcomes include seeing regulations for 2028 through 2032 model years are lowered instead of seeing the 2027 model year regulations frozen. In that case, regulations for post-2032 model year would be less onerous both because of the administration's view and because the 2033 model year would be starting from a less difficult base than if the current regulations were held.
We also see potential for the MCHV GHG Phase 3 regulations to be redrafted; that process could take 24 to 36 months, which would effectively eliminate the 2027 implementation of GHG Phase 3 while new rules are drafted, with current GHG Phase 2 rules staying in place.
Inflation Reduction Act and Bipartisan Infrastructure Law funding future
The Inflation Reduction Act (IRA) has been codified since 2022 and requires Congressional action to substantively change. The IRA includes both consumer-level incentives as well as manufacturing incentives designed to ensure a more robust North American supply chain. The IRA also has significant funding available for purchasing, installing, operating and maintaining Class 6-7 ZEV trucks as well as funding for purchasing or installing ZEV port equipment or technology, including ZEV trucks themselves.
The Bipartisan Infrastructure Law is a much broader act; relative to the auto industry and electric vehicle adoption, the President has signaled intent to eliminate funding for electric charging infrastructure.
As the Republican party has control of both chambers, making changes could happen more easily. These laws do require Congressional action to change. However, reducing manufacturing funding is likely to reduce investment. Approximately 84% of the jobs supported by IRA funding (about 135,000) are in Republican states.
S&P Global Mobility estimates those direct jobs have a multiplier effect of 5 to 10 jobs for each of the direct jobs. As a result, Republican Senators and representatives of Congress from districts where this investment is being made may philosophically agree with reducing funding, yet also have a responsibility to their constituents to support the local economy. Their support for reducing funding cannot be assumed.
Against this backdrop, we have focused our assumptions. We expect the retail consumer lease credit for EVs available under the IRA will be eliminated. The critical raw materials and local components manufacturing credits are likely to be maintained, to help reduce the use of foreign raw materials and components. Given the impact on Republican states of manufacturing investment, we expect the advanced vehicle manufacturing credits available under the IRA will be maintained.
California: Waiver expected to be revoked within first 100 days
The 1967 Clean Air Act allows California Air Resources Board a waiver to set their own GHG emissions standards, and Section 177 allows for other states to choose to adopt California's standards or the US federal standards. California's Advanced Clean Cars I program saw its waiver revoked during President Trump's first presidency and reinstated under President Biden.
However, the Advanced Clean Cars II program, which goes to 2035 and requires 100% zero-emissions light vehicle sales, has not been granted an EPA waiver. The first ACC is still more aggressive than federal standards, and this waiver is expected to be revoked. Under President Trump, there is nearly no potential for the ACC II program to be granted a waiver.
Another wrinkle in the California situation is that several automakers signed a Framework Agreement in which they agreed to follow California's ACC I standards. That contract remains enforceable, to our understanding. Among the automakers who have signed are BMW, Ford, Honda, Volkswagen and Stellantis.
Simultaneously, legal challenges to ending the California exemption are being prepared. Ultimately, when the waiver is revoked, legal challenges will be filed. These legal challenges may need to be resolved by the Supreme Court.
California's waiver has a massive impact. As we noted earlier, the EPA and NHTSA regulations are not aligned. If they are revised and aligned as expected, and frozen at 2027 model year, the emissions requirements would be out of alignment with California under ACC I or ACC II.
California's Advanced Clean Car Act II mandates 100% light-duty ZEV by 2035. Given that we do not expect industry to be capable of meeting the federal regulations at this time, the more aggressive California standards may need to be delayed by the state of California as well. Revoking the waiver could close the matter.
Global tariffs and the 2026 USMCA Review
On day one, the President did not issue new tariffs, though is directing federal agencies to evaluate US trade relations with China, Canada and Mexico. The fallout from tariffs is expected to prove damaging to US economic activity.
The December 2024 S&P Global Mobility light-vehicle forecasts assume the implementation of a 10% universal tariff along with a 30% tariff on imports from mainland China. This would give rise to a period of elevated inflation, to which the Federal Reserve is forecast to respond by pausing its easing cycle in mid-2025. However, this is one of the most fluid elements of the administration's policies and forecasts will be adjusted as more information is available.
The President floated possibility for imposing the 25% tariff mentioned during the campaign as soon as Feb 1, 2025. The president was quoted as saying, relative to Canada and Mexico, "We are thinking in terms of 25% on Mexico and Canada, because they are allowing vast numbers of people" into the US and said that it could be imposed on February 1. The agencies are being directed to investigate and remedy persistent trade deficits and address unfair trade currency policies by other nations, according to a Wall Street Journal report.
The USMCA free trade agreement between the US, Mexico and Canada includes a required review scheduled for July 2026. President Trump's comments on Day One echo that the potential 25% tariff on Canada and Mexico are intended as a measure to pressure both countries to better deal with illegal immigration to the US.
While President Trump's Jan 20, 2025, comments suggest this tariff could happen sooner, our thinking has been that we will see no changes until the 2026 renegotiation of the USMCA. While we have expected that those threatened tariffs would not occur prior to the review, the Jan 20 comments reflect the potential fast pace of activity expected from this President, and our assumptions may need to be reviewed.
In addition, a tariff against the US neighbors and long-standing trading partners might be a nuanced tool rather than a sledgehammer, with specific industries targeted and exemptions for others. At this time, we do not know the details on what this tariff will look like, however. A tariff on Mexico and Canada could revise our expectations for a 10% universal tariff as well.
Relative to trade and tariffs outside of USMCA, S&P Global Mobility has put in place an assumption that there will be a 10% increase on all imports from Europe, Japan and any other country than mainland China or Canada and Mexico with the December 2024 forecast. We also expect a 30% tariff on imports from mainland China. We see these tariffs starting from the second quarter and ramping up over the subsequent four quarters. We do expect other countries to respond with retaliatory tariffs, though have not provided specifics how those will develop.
One of Biden's last acts was to implement a rule banning the sale of vehicles in the US which have software and or hardware related to vehicle connectivity and levels of autonomous vehicle driving systems; that ban effectively halts the sale of any vehicle produced in mainland China, by any automaker. This ban does not take effect until 2027 model year for software and 2030 model year for hardware, yet still has significant impact.
The rule also bans these technologies if developed in China or Russia regardless of where they are produced, which effectively bans mainland China brands from building in Mexico and shipping to the US under USMCA. At time of writing, it is uncertain what the Trump Administration's reaction will be. On its face, the ban does support the America first and national security issues which Trump has said are a priority for his administration.
President Donald Trump is in office: Assumptions affecting total industry volume (TIV)
S&P Global Mobility continues to update the forecast against these changing conditions. As of January 2025, we see that these series of changes could result in the EV share of US light-vehicle sales reaching about 25% in 2030, which is lower than the 30% we had forecast with our December 2024 forecast.
The relaxed NHTSA corporate average fuel economy targets are expected to result in increased demand for internal combustion engine products, as well as potential for production planning to adjust on country of origin, resulting from tariffs. We expect that the consumer interest in ICE products will be boosted by relative lower prices, while automakers will extend lifecycles with changes to regulations.
Along with the increased demand for ICE products, we expect EV demand will be impacted by the reduction in government incentives to consumers. Demand for plug-in hybrid electric vehicles (PHEVs) is likely to decline as well, depending on the final form of IRA incentives and automaker production plans. Hybrid electric vehicles (HEVs) will see increased share, depending on gas prices and the changes to regulatory policy.
As previously noted, we do expect tariffs to have an adverse impact on our future total industry volume (TIV) assumptions. Whether the tariffs are protective or punitive, or a mix, these will have an adverse effect on TIV. They will increase costs to customers, perhaps partially offsetting the vehicle affordability gains that a lower EV mix may enable. We also expect that tariffs will increase labor rates. Tariffs will increase US or North American sourcing, which comes along with higher labor rates.
Another key issue for our TIV assumptions, and another wildcard, involves how the situation around immigration resolves. President Trump signed executive orders affecting handling of immigrants and immigration processes on day one. These stricter immigration controls and potential for mass deportations can work as a disadvantage to TIV. Fewer immigrants reduces the pool of customers and buying power of consumers in the US.
A path forward becomes more clear
While consumer uncertainty and resistance to change relative to full electrification remains, activity under President Trump, as expected, paint a clear expectation for US policy direction in the immediate term. In our earlier reporting, we noted that automakers and suppliers have been delaying near- and long-term product planning decisions. As policy details continue to come into focus, even if details are outstanding, we will begin to see decisions being made. We fully expect automakers are ready to act, and many have a clear idea of where they will move their propulsion system design mix.
For more analysis and support:
- Get a free trial of AutoIntelligence Daily, our daily news service for comprehensive industry news.
- Speak with our consulting representatives for company-specific impact analysis.
- Subscribe to AutoTechInsight, our platform that offers detailed analysis on supply chain and technology industry developments.
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.