President Trump, the sequel
On Monday, Donald J. Trump was inaugurated President of the United States, only the second person in history to serve a non-consecutive term. As expected, he set about immediately signing a series of Executive Orders to begin implementing his agenda. You can check out this ongoing list HERE, but for now let’s cover which impact our industries.
On electric vehicles, his Order on “Unleashing American Energy” states that is the policy of the United States:
“to eliminate the ‘electric vehicle (EV) mandate’ and promote true consumer choice, which is essential for economic growth and innovation, by removing regulatory barriers to motor vehicle access; by ensuring a level regulatory playing field for consumer choice in vehicles; by terminating, where appropriate, state emissions waivers that function to limit sales of gasoline-powered automobiles; and by considering the elimination of unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs over other technologies and effectively mandate their purchase by individuals, private businesses, and government entities alike by rendering other types of vehicles unaffordable”.
In terms of concrete actions to further that policy, he repealed a Biden EO that established a goal of 50% of new cars and trucks to be zero emissions by 2030. He ordered all agencies (including EPA) to undertake a review of what stands in the way of implementing the policy goals established in the EO. While the above language is a clear statement that the President wants to get rid of the advanced clean cars rule in NJ, more action will be needed to actually accomplish that. The EO also orders all agencies to cease distributing all funds tied to installing EV charging stations, though it’s not yet clear how much of that money was transferred to state governments before Biden’s term ended.
Trump also wants to significantly increase domestic oil production overall, which would bring down oil prices in the medium to long term. In terms of concrete actions, so far he has removed some restrictions on drilling in Alaska and offshore. His presence as President is also likely to increase confidence among oil drilling companies that there is a future in the industry. It was reported that Biden’s statements about a zero fossil fuel future led to many companies choosing not to invest in drilling operations even when they were legally allowed to do so, out of fear that by the time the wells started producing the market would have been gutted by Biden Administration policies.
One policy he has not so far followed through on is tariffs. He had previously expressed a desire to have a 25% tariff on Mexican and Canadian imports go into effect on Day 1, as well as higher tariffs on Chinese imports. Day 1 has come and gone and there was no change, but he did make a public comment that he expects to implement the Canada/Mexico tariff on February 1st. That is, however, so far just a statement, with no legal action yet taken. During the campaign he had suggested a tariff on all imports from all countries, of either 10% or 20%, but has not mentioned it much since, instead focusing on Canada, Mexico, and China.
A universal tariff might also not be legal for him to enact himself. The President has broad powers to enact tariffs on specific goods and/or specific countries because that power has been explicitly granted the office of the President by various Congresses over the past century. The ability to enact these tariffs unilaterally is no doubt part of the appeal for President Trump. Congress is considering enacting an across the board tariff as part of the big tax bill they are working on.
Many types of auto parts are manufactured, in part or in whole, in Mexico and Canada, and some companies have already explicitly said they will pass on the cost of the tariff to purchasers.
We are also concerned about the impact these Canada/Mexico tariffs would have on the price of gasoline and diesel. A significant amount of oil refined in the US is imported from Canada (about 20% of all oil used), but thankfully for us it appears most of that oil is used in the Midwest. Theoretically, those refineries could avoid the higher price from the tariff if they used USA produced oil, but currently those refineries are all designed for the heavier Canadian type of crude oil, and cannot simply switch over to the lighter American crude without significant retrofits. Analysts have guessed the price of gasoline could jump anywhere from 25¢-75¢ a gallon in the Midwest as a result of this tariff. Our region does appear to import some crude oil from Mexico, but this is shipped in through the ports, and it should be possible to avoid the tariff by importing from unaffected countries. It remains possible that oil and gas products could be exempted from any tariffs, though there have been some statements from Canadian officials that they may retaliate against any tariffs by cutting off energy supplies to the US as a way to increase prices in the US and strengthen their negotiating position.
The risk to us here is if suppliers find out that they can make 75¢ a gallon more on fuel if they truck it out a few hours West, does it become worth the higher cost of transportation to truck it out there rather than sell it in state. If so, will that mean NJ distributors will effectively need to bid a higher price than they currently do to keep in state and available to NJ retailers? Tariffs on all imports would certainly increase fuel prices here in NJ, as we import both crude oil (to be refined at Bayway in Linden) and refined petroleum products (in addition to domestic supplies coming up the Colonial Pipeline). Unrelated to tariffs, Trump also suggested a ban on imports of crude oil from Venezuela as a way to punish their government, another move that would increase oil prices in the US as that country is a major supplier.
Though this was not (yet) in an Executive Order, the President did state that it was his goal to completely refill the nation’s Strategic Petroleum Reserve (SPR), a large portion of which was sold off during the Biden Administration. NJGCA has long been a supporter of keeping the SPR full and ready to respond to an emergency.
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