The world breaks everyone, and afterwards, some are strong at the broken places
—Ernest Hemingway
We all know the proverbial you-know-what is going to hit the fan come Monday. We’re not quite sure what manner of feces might be sprayed, how stinky it will be, and — because I really do like to paint a picture — how much of it is going to stick. But malarkey Mr. Trump has promised, so malarkey there will be.
The only other questions are how deep this pile of doo-doo will be, how much of it will end up on our porch, and how long it will take us to clean it up. That’s why, on the eve of his inauguration, Motor Mouth will take on Trump’s automotive machinations, evaluate how much damage they might cause, and, perhaps most importantly, estimate the odds they’ll come to fruition. Without further ado, then, here’s what the next four years look like for the automobile industry.
Trump’s Tariffs
You’d have to have your head all the way down one of Landman’s 13,000-foot-deep fracking holes to not know the president-elect is threatening to slap some tariffs of 25% on pretty much everything Canada exports to the United States. Their presumed effect is pretty well-known. Americans will pay higher prices, the Canadian economy will tank, and our automobile industry, both parts and finished product, will suffer immensely until — or is that “if”? — they are lifted. It will be a rough ride while it lasts.
There are some consequences we aren’t talking about, however. As I said, we all know what the short-term pain will be. It is, as the actuaries that lurk in the background of all corporate policy say, already factored in.
Most experts think the pain will be short-lived, the accepted wisdom being that Mr. Trump is simply negotiating, and that, once he gets whatever it is that’s rattling around in his head — be it border security or his much-loathed trade imbalance (which, by the way, swings in America’s favour once you factor out Danielle Smith’s oil) — he’ll call it a win and move on to screwing someone else over.
The current accepted wisdom also posits that Mr. Trump only has a limited time-window for his tariffs. Perhaps he finds out that some American automakers are more exposed to Canada — i.e. they ship more cars to Canada than they export out — than we are to them. Or, maybe, the higher prices his tariffs will push on American consumers will damage his popularity. Either might seriously piss off his MAGA supporters, and Mr. Trump is nothing if not a poll-whore.
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But what if — and I barely dare write this, lest he not have thought of it yet — his tariffs prove popular? In a perfect MAGA world, these new penalties would actually do what they’re supposed to: repatriate industries. It’s no secret that Honda Canada, which has yet to break ground on its reported $15-billion investment in battery and EV production here in Ontario, is thinking that perhaps its new plant might be better situated in the continental 48.
On the other hand, existing auto manufacturers, with their multi-billion-dollar facilities already in place, are holding tight, waiting for either the tariffs to abate or the federal government to propose countervailing tariffs on American cars. But what if things get bad enough for long enough that industries actually do start repatriating back to the U.S.? It’s a long shot to be sure, but the longer these tariffs drag on, the more difficult Canadian-based automakers will find it to competitively produce automobiles on this side of the border, especially if the Canadian government doesn’t retaliate.
Worse yet, at least for those believing the next American election might provide salvation, let’s remember that the Democrats are, at least traditionally, more protectionist than the GOP. If whoever takes up the Democratic mantle in 2028 sees that Trump’s tariffs have been effective, there’s not a hope in Hell they’ll be repealed. What I’m trying to say here is that the real threat to Canada’s economy — and the auto industry that is its engine — is not the depth of Trump’s tariffs, but their duration.
Odds that tariffs will be imposed: 80-20; and 20-80 (on oil) if Danielle Smith bows deeply enough
The War on EVs
President-elect Trump has not shied away from proclaiming he’ll end EV subsidies tout suite. He’s not actually specified which subsidy he’s talking about — portion 30D of the Inflation Reduction Act, which give consumers USD$7,500 if they buy an EV; or part 45X, which subsidizes battery production to the tune of billions per year per automaker — but it’s almost assuredly the former, since EV and battery production is mostly clustered in loyal MAGA states.
The question is how to get rid of them. According to people who understand governmental affairs far better than I, simply stopping the program may prove difficult. He could, however, squeeze the purse strings so tight he shuts down the program’s funding. You know, kinda like what happened to our Canadian EV incentive program, only deliberately instead of through incompetence.
Odds that American EV subsidies will get throttled: 90-10, but those last ten points are only because I’m not sure Trump’s mandarins are smart enough to figure out how to do it
The War on EVs (Part Deux)
Lost in all this talk of tariffs is that, despite Elon Musk being part of Trump’s inner circle (at least for now) EV mandates still stick in Trump’s craw. Enough that, even if tariffs are dominating headlines, erasing EV mandates from American politics is still front and center on Trump’s to-do list. And when he means to get rid of American EV mandates, he is, of course, talking about California’s famed waiver that lets it set its own environmental standard.
It’s an immensely complicated subject, but I’ll keep it as brief as possible. In 1967, the Environmental Protection Agency passed the Air Quality Act, which granted smog-beset California the right to set its own “air pollution” standards. California, over time, then interpreted that to mean it had the right to ban ICE-powered cars by 2035, as well as mandate that everyone drive zero-emission vehicles.
Trump supporters see this as the EPA and, by association, California, expanding its powers beyond what Congress originally granted them. Their argument is called the “major questions” doctrine, and it basically means agencies should not take any action not specifically directed them by Congress. In essence, the doctrine allows that the EPA can regulate emissions from any fuel type (i.e. gasoline, diesel, etc.) that was extant when the law was passed, but it would not allow the agency to make any regulation that forces automakers to switch to battery-power without an explicit act of Congress.
The argument has already been successful, having been used to overturn other EPA mandates. Equally encouraging for MAGA, it’s hard to find a conservative on the Supreme Court that doesn’t think the concept is sacrosanct.
The real threat to Canada’s economy — and the auto industry that is its engine — is not the depth of Trump’s tariffs, but their duration
The other tactic is to argue that California’s waiver violates “equal sovereignty” amongst states, which essentially means allowing California its own environmental mandate might be unconstitutional. Though not quite as assured a win for the MAGA crowd as major questions, the biggest obstacle for both would seem to be getting their case before the Supremes. If either is argued before the highest court in America, they have at least a good chance of succeeding.
As to why this pisses Trump off so much, understand that some 14 other states — representing just a little less than half the auto sales in the U.S. — have adopted California’s ZEV standards. So, while there is, in fact, no official national EV mandate in America, California’s rules are the de facto standard most automakers work with.
Odds the case gets to the Supreme Court: 25-75, but, if it does reach the bench, Trump wins in a slam dunk
The Four Pillars
As to why, particularly in the wake of Trump’s tariff threats, the threat of California losing its waiver should be important to Canadians, consider the following. Electric-vehicle protagonists — especially those in Quebec, which also has its own EV mandate — will no doubt disagree, but North America’s much-promised transition to all things electric depends on four pillars:
- A federal consumer electric-vehicle rebate program in Canada;
- A federal consumer electric-vehicle rebate program in the United States;
- A federal EV mandate in Canada; and
- The California EV mandate that, again, regulates almost half the new cars sold in the U.S.
As of December 31, 2024, all four of those pillars were still holding up Fort EV. Fast-forward barely two weeks, however, and number 1 (Canadian EV incentives) is gone, and unlikely to return. In the near future, number 2 (American EV incentives) will likely disappear as well. Number 3 (Canada’s EV mandate) is likewise almost assured to vanish as soon as the Conservatives return to power, sometime in late spring or early summer, if, of course, the NDP holds to its promise to bring down the government as soon as parliament returns on March 24.
That would leave only California’s mandate in place. Besides being the de facto emissions regulation that automakers must meet, California is also North America’s spiritual home of zero-emission vehicles (Quebec’s original EV rules, for instance, were largely based on The Golden State’s, translated into French).
So important is California to the EV industry that, even if consumer incentives on both sides of the border disappear and Canada’s EV mandate ends up gone forever, electric vehicles would probably remain relevant in North America, albeit diminished. But if, by some miracle — that’s sarcasm, by the way — of jurisprudence, Trump’s team manages to roll back California’s waiver, North America’s electric-vehicle industry is in for a whole world of hurt.
While that may not be as immediate a problem as the tariffs we’re likely to see imposed Monday, the mountains of money that have been committed to EV manufacturing means it might be longer-lasting.
Author’s Note: Eagle eyes — those who might understand this quagmire better than I — will note I have not mentioned challenges to the EPA’s right to set its current emissions standards. Essentially the argument is that “because carbon dioxide emissions levels correspond to mileage in automobiles powered by fossil fuels, these EPA rules are de facto fuel economy requirements,” something, the proponents of this tactic say, exceeds the agency’s purview.
This strategy is, as far as I can tell, a weaker argument against the EPA’s interpretation of rules than the challenge of California’s waiver. More importantly, it’s one championed by Project 2025, that (semi-)shadowy clique of conservatives who claim to have Trump’s ear but whom he officially disowns. In other words, I find it impossible to determine, with the same degree of certitude, whether they will enjoy success or even have Trump’s support. If any legal beagles — bar-accredited or no — have any further insight, I’d love to hear it.
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