Trump, carmakers forge complicated relationship
Washington — As he approaches the second anniversary of his election, President Donald Trump has developed a complicated relationship with the U.S. auto industry.
Automakers cheered when the president re-opened a review of stringent gas-mileage rules that would have required fleets averaging more than 50 miles per gallon by 2025. But Trump went further than carmakers wanted by proposing to freeze the mandate after 2020, when their lineups must average 39 mpg.
On trade, the gulf between the auto industry and the Trump administration is even wider.
Early in his term, Trump attacked U.S. automakers for building vehicles in Mexico, where lower labor costs made small-car production profitable. And over their objections, he imposed tariffs on foreign steel and aluminum.
Trump threatened repeatedly to leave the North American Free Trade agreement, which carmakers say is necessary to compete in a global market. Uncertainty over the Canada-Mexico trade treaty threatened supply chains and complicated long-range planning.
Contentious negotiations eventually led to a proposed NAFTA replacement that keeps the companies' preferred trilateral framework in place, but the new deal would increase the percentage of a car’s parts that have to be built in the U.S., Mexico or Canada to qualify for duty-free treatment. Additionally, the president continues to threaten tariffs as high as 25 percent on imported cars, which causes Detroit manufacturers to fret about retaliation.
One of Trump's first official acts was to quit the Trans-Pacific Partnership, a deal with 11 other countries that would have boosted access to Asian markets for U.S. carmakers. His administration is now moving to re-open trade agreements with Japan, the United Kingdom and the European Union. The new negotiations could further strain the relationship between the president and carmakers.
U.S. Rep. Debbie Dingell, D-Dearborn, said Trump's reputation as a tough negotiator and expert dealmaker has made him difficult to read at times for automakers.
"The guy is so into the 'Art of the Deal,' nobody knows what he's going to do," she said. "Every business needs consistency and stability. If you don't have consistency and stability, that's a problem for all businesses."
The relationship between the Trump administration and automakers has evolved in unexpected ways since Trump kicked off his tenure with a high-profile White House meeting with CEOs from each of the Detroit automakers during his first week office in 2017. Trump invited the Detroit Big Three leaders back for a second meeting in May of this year that also included executives from Toyota, Nissan, Mercedes-Benz, BMW, Honda, Hyundai and Volkswagen.
The meetings triggered hope of the industry having a friendly ear in Washington, but automakers have since worried that the dealmaking president has only heard part of the message.
Mitch Bainwol, president of the Washington, D.C.-based Alliance for Automobile Manufacturers, which lobbies for both U.S. and foreign-owned automakers, said Trump has taken an unusually high interest in the industry ever since he was a long-shot candidate for president. Bainwol said the president has been accessible to automakers and listens when they present their cases to him, although the harmony is frequently disrupted when it comes to trade talks.
"He came in with a clear vision on our issues,” Bainwol said. "He's very focused on the Midwest. When he woke up as a candidate, and when he wakes up now, he sees himself as an autos president. His views are not where we are on trade. We occasionally have collisions; that's a part of life."
Bainwol said he thinks Trump and automakers have a better understanding of each other than they did in early 2017.
"We've come to understand several things," Bainwol said. "He's passionate about cars, he's passionate about our industry and about our workforce. He’s not following a staff-driven script. His style is to achieve leverage and use that leverage for his vision of good. What that means is there are going to be bumps and bruises as that leverage is deployed, which can be painful for us. But our goals are the same — a vibrant industry.”
The pain for automakers has presented itself most frequently in trade talks. Trump has frequently targeted carmarkers for building cars in Mexico and he falsely has taken credit for actions that already were planned, such as Ford's decision to cancel a move of some Lincoln MKZ production from Kentucky to Mexico.
One week after his surprise election, Trump tweeted: "Just got a call from my friend Bill Ford, Chairman of Ford, who advised me that he will be keeping the Lincoln plant in Kentucky — no Mexico." Ford later clarified that it never intended to move all of its MKZ production to Mexico.
More recently, the Trump administration is considering punitive tariffs as high as 25 percent on imported cars and parts, despite fears of higher prices for cars and parts — and concern from Detroit carmakers of retaliation from foreign countries they export to.
Bainwol said Trump's other moves to cut corporate taxes and re-open the so-called mid-term review on gas-mileage rules were big wins for the industry.
Tax cuts, he said, were a "were a shot in the arm for the economy and consumer confidence is high. As a cyclical industry that hit its peak as he came into office, we benefit when the economy is strong."
Michelle Krebs, senior analyst for Autotrader, said the potential economic boost from the Trump administration's tax cuts has been undercut by the uncertainty the industry has faced regarding international trade rules.
"It's extremely difficult to do long-term planning when there are so many policies up in the air," she said. "We still haven't settled CAFE (Corporate Average Fuel Economy standards), steel and aluminum tariffs are hurting automakers. The U.S., Mexico, Canada stuff is mostly settled, but they still have hanging them what he's going to do with trade with the E.U., Japan and the UK.
"The one thing they got that they asked for, it didn't turn out the way they thought," she said, referring to the gas-mileage rules that are currently under review. Krebs noted that automakers have maintained that they want annual increases in fuel economy standards, but they want one national set of rules that also taken into account consumer preferences. Trump has proposed a freeze in the mpg rules from 2020 until 2026.
Dingell predicts auto issues will continue to dominate the agenda in Washington, even if Democrats win control of one or both houses of Congress next month.
"2008, 2009 was a nightmare for Detroit," she said. "Everybody that had anything to do with it in public policy didn't want to do anything with autos. A lot of these issues that sort of got put to the side are going to be back, front-and-center."
Dingell said the relationship between automakers and Washington is likely to be different if one of one or both houses flip.
"Republicans aren't going to support the president on trade," she said, referring to the fact that Congress will have to approve Trump's proposed replacement for NAFTA and any other trade deals. "They're looking for people like me to help."