With less than 40 days until the 2024 U.S. Presidential Election on Tuesday, Nov. 5, the race between the Democratic candidate, current Vice President Kamala Harris, and former President Donald Trump on the Republican ticket is reaching a fever pitch.
While the two candidates’ platforms vastly differ on key issues such as immigration and abortion access rights, a notable issue that the former President has flip-flopped on was electric vehicles — a move that can be credited to the influence of Tesla CEO Elon Musk.
Related: Elon Musk’s subtle EV pitch nudges Trump in the right direction
The former President has recently highlighted his vision for the economy, which differs from Harris’s vision for an “opportunity economy.”
However, one particular detail that he touted as a game-changer for American auto workers at a recent rally might spell doom for the U.S. auto industry.
Republican presidential nominee, former U.S. President Donald Trump speaks at a campaign rally at the Johnny Mercer Theatre on September 24, 2024 in Savannah, Georgia.
“We want their plants here.”
At a rally in Savannah, Georgia on the afternoon of Sept. 24, former President Trump addressed a crowd of supporters with a speech centered around his plans for the economy if he were to take the Oval Office.
However, while he spoke about specific topics like future economic opportunities and the tax code, a large chunk of his remarks were dedicated to U.S. manufacturing, specifically auto manufacturing.
In a lengthy rant about his view of the current state of the auto industry and auto manufacturing, he expressed his desire to impose a hefty penalty against automakers who dare to make cars outside the borders of the United States, namely Mexico.
“[Automakers] think they’re going to sell their cars into the United States and destroy Michigan and South Carolina and North Carolina and Georgia and all of the places that make autos. It’s not gonna happen,” Trump told the Georgia crowd.
“We will put a 100 percent tariff on every single car coming across the Mexican border. And tell them the only way they’ll get rid of that tariff is if they want to build a plant right here in the United States with you people operating that plant. We want American citizens and we want their plants built here, not two feet over the border and selling them into our country. We’re not doing that. We don’t do that anymore.”
More Automotive:
The Toyota Crown is a masterclass in cheap, quiet luxuryFord making radical change that might anger loyal consumersGavin Newsom’s ‘EV mandate’ is under U.S. Supreme Court threat
In essence, Trump sees Mexico as a theoretical back door for foreign and domestic automakers to take advantage of the American auto market, and he wants to send a message that will discourage such behavior.
After recalling a supposed conversation about Mexican auto plants between him and a person who supposedly builds large, technologically advanced auto plants, the former President predicted that the plan to hang the tariffs over automaker’s heads might work.
“In fact, when [automakers] learn about the 100 or 200 percent tariff, you know, they’ll probably say, ‘Yeah, lets stop construction immediately.’ You’ll see a big difference. I will bring automobile manufacturing back to the highest level in the history of our country,” Trump said.
“It used to be we were the only place, then it just got chipped away, chipped away. Mostly by China and Japan. […] But it’ll be like it was 50 years ago. These jobs they’ll become roaring back. We’re going to be making autos at a level like you’ve never seen before. We’re going to be making cars bigger, better, more beautiful, stronger, faster than ever before.”
Enrique Pena Nieto, Mexico’s president, from front left, U.S. president Donald Trump, and Justin Trudeau, Canada’s prime minister, sign the United States-Mexico-Canada Agreement (USMCA) at the G-20 Leaders’ Summit in Buenos Aires, Argentina, on Friday Nov. 30, 2018.
Trump’s own hurdle
The remarks in Georgia double down on similar remarks he made on Sept. 23 during a policy roundtable in Smithton, Pennsylvania, during which he threatened cult tractor farm equipment manufacturer John Deere (DE) with stiff tariffs if they followed through on their plans to move certain production to facilities in Mexico.
“I love the company, but as you know, they’ve announced a few days ago that they’re gonna move a lot of their manufacturing business to Mexico. I’m just notifying John Deere right now: If you do that, we’re putting a 200% tariff on everything that you want to sell into the United States,” Trump said.
First announced in June, John Deere’s plan calls for the production of some specific components to move from Dubuque, Iowa, to Ramos, Mexico, by the end of 2026.
In a statement on its website, Deere said it “deeply values the highly skilled U.S. workforce in our hometown communities that allow John Deere to make the best equipment in the world.”
“In response to challenging market conditions, we have recently taken steps to reduce costs—including workforce reductions. These decisions were difficult, yet vital for our continued success and competitiveness.”
Related: Biden plan to purge auto tech from China might actually hurt Detroit
However, an important stopgap prevents Trump from actually enacting his dream of triple-digit tariffs; one of his own policies.
Signed into law in 2020, the former President’s replacement for the North American Free Trade Agreement (NAFTA) was the United States-Mexico-Canada Agreement (USMCA), which he touted at the time as “the fairest, most balanced, and beneficial trade agreement we have ever signed into law.” If Trump expressed a desire to withdraw from the USMCA, it would require Congressional approval.
The USMCA prohibits the use of tariffs on many goods and allows companies to produce them in either the United States, Canada or Mexico and export them among the member nations with little red tape. Under the USMCA, automakers must make cars with at least 75% of North American-made parts to qualify for tariff-free entry. Previously, under NAFTA, the number was 62.5%.
Additionally, the Council of Economic Advisers, which provides economic research for the White House, argues that large-scale tariffs would create the opposite effect of what Trump might want.
They note that data shows that large-scale tariffs “result in significant declines in domestic output and productivity, higher unemployment, more inequality and real exchange rate appreciation, implying a loss of international competitiveness, while having only small effects on the trade balance.”
Related: Veteran fund manager sees world of pain coming for stocks
