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This week in Trumponomics: Car Wars

Rick Newman
Senior Columnist

President Trump has never run a car company, but he’s pretty sure he’d do it better than the boneheads in charge of General Motors, Ford and all the other big automakers.

Automotive CEOs generally understand climate change and consumer trends and believe their cars need to get considerably cleaner, and soon. Carmakers have gone from resisting every mandated efficiency improvement to grudgingly accepting them, and even moving the needle themselves. That’s why every automaker is spending bigly to develop electric vehicles and other alternatives to gas-powered engines.

(AP Photo/John Raoux, File)

Trump, however, is ‘70s Man, nostalgic for the glory days of sooty smokestacks and toxic runoff. So he has gutted Obama-era gas mileage rules that would have required fleets to average 54.5 miles per gallon by 2026, in favor of his own plan for an average of 37 MPG. This, he claims, will make American cars safer, cheaper and more competitive globally.

Trump has also gone to war with California, by planning to revoke the state’s right to set its own mileage standards higher than the national average. California has been doing this for nearly 50 years, because of unique pollution problems like smog. The law clearly allows it. Trump is peeved because some automakers would prefer to abide by the stricter California rules than his own.

Trump’s car wars are another example of the president creating turmoil for business because of nothing more than personal pique. This week’s Trump-o-meter reads FAILING, the second-lowest mark.

Source: Yahoo Finance

Trump is not 100% wrong here. Automakers did ask Trump for some modest relief from the tough Obama standards shortly after he took office. But Trump went much further than they wanted, perhaps as a sop to pals in the oil business. Trump’s dramatically lower MPG proposal would create a huge rift with California and 13 other states that follow its rules, essentially requiring automakers to build two sets of cars: One set for the California states and another for the states following the lower Trump standard.

Misleading on lower-mileage cars

The technology required to boost fuel economy does add to the cost of cars. But it also reduces what drivers spend on gas, in two ways. First, higher-mileage cars simply burn less fuel. And second, as all drivers use less fuel, demand dips and gas prices drop. As with many other Trump claims, there’s a kernel of truth in his claims about the benefits of lower mileage, but a bowlful of dishonesty.

Lower-mileage cars are not safer, either, as Trump insists. The dubious theory is that cars will cost less if they contain less fuel-saving technology, and more people will upgrade from older cars to newer models with better safety technology, saving lives. But safety experts have looked at the record in other countries and found no evidence that auto fatalities rise along with fuel-economy standards. Plus, there’s the added health risk from more pollution spewed by lower-mileage cars.

Automakers have struggled with the two-standard problem for years, and President Obama finally reached a deal that would harmonize national standards with the California rules and allow automakers to build one set of vehicles. Trump is shredding that. Maybe automakers should have seen it coming when they asked Trump to ease the national standard. But that was early in his term, when many CEOs believed Trump really would be friendly to business. Instead, Trump has turned out to be quixotic and only business-friendly when it aligns with his self-interest.

Protesters with Environment America stand outside the Environmental Protection Agency as EPA Administrator Scott Pruitt holds a news conference on his decision to scrap Obama administration fuel standards, in Washington, April 3, 2018. (AP Photo/Andrew Harnik)

What auto CEOs know, and Trump doesn’t, is that they have to build cars for a global market, not just one (or two) domestic markets. Governments virtually everywhere are tightening pollution rules and encouraging—and in some cases forcing—automakers to build electrics and other models that pollute less. The car industry is ruthlessly competitive, and the producers that win will be the most efficient ones, able to spread common components across worldwide assembly lines.

Building cars in America that are too dirty to sell in other parts of the world would make U.S. producers less competitive, not more. It would send jobs overseas instead of anchoring them here. Trump, of course, doesn’t care about such subtleties. Just do what he says. And moan to somebody else about the consequences.

Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: rickjnewman@yahoo.com. Encrypted communication available. Click here to get Rick’s stories by email.

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