On Thursday, President Donald Trump unveiled a two-pronged strategy that could significantly reshape the future of the U.S. automotive industry: threatening to raise tariffs on imported vehicles and rolling back California’s aggressive clean-air regulations. The moves, delivered at a White House signing ceremony, signal a dramatic shift toward protecting domestic manufacturing while reversing course on efforts to mandate electric vehicle adoption.
The president floated the idea of increasing current auto tariffs beyond their existing 25% threshold, arguing that doing so would compel foreign automakers to shift production to U.S. soil. “I might go up with that tariff in the not too distant future,” Trump said. “The higher you go, the more likely it is they build a plant here.”
Trump’s tariff remarks arrive just one week after his administration doubled tariffs on steel and aluminum imports to 50%, and just ahead of a July 9 deadline, when a broader round of increased duties could take effect. Trade officials from countries with heavy auto exports to the U.S., including Japan and Germany, are racing to negotiate exemptions amid fears that a tariff surge could destabilize not only their economies but also global supply chains. Analysts warn that such tariffs, if implemented, would reverberate through the industry, raising vehicle prices, inflating parts costs, and straining dealer inventories — particularly for companies that rely on globalized production models.
California EV Mandate Revoked
The more immediate impact came from Trump’s formal revocation of California’s landmark environmental rules that would have banned the sale of new gasoline-powered vehicles by 2035. In the East Room of the White House, Trump signed legislation passed by Congress that nullifies California’s authority — previously granted under the Clean Air Act — to set its own vehicle emissions standards. The new law also erases mandates that required automakers to increase sales of zero-emission vehicles each year. “We officially rescue the U.S. auto industry from destruction by terminating California electric-vehicle mandate once and for all,” Trump said, calling the repeal a permanent safeguard against what he described as unworkable environmental overreach.
The rollback is a major victory for automakers and dealers who have lobbied for consistent national standards rather than a patchwork of state-by-state regulations. Groups such as the National Automobile Dealers Association and American Truck Dealers applauded the move, saying the now-overturned California rules would have curtailed consumer choice, raised vehicle prices, and disrupted market stability. Toyota Motor Corp. echoed the sentiment, praising the elimination of what it termed an “unrealistic battery electric vehicle mandate” and emphasizing that consumer demand — not government directives — should drive product development, something you’ve heard me say many times on the Car Pro Show. The people will decide what kind of car they want to spend their hard earned money on.
Automakers have increasingly voiced frustration with what they viewed as overambitious electric vehicle mandates, particularly those requiring rapid shifts in production while battery costs remain high and infrastructure gaps persist.
However, the administration’s moves triggered swift legal and political pushback. A coalition of 11 states led by California — including New York, Massachusetts, Colorado, and Washington — filed a lawsuit Thursday in U.S. District Court seeking to invalidate Congress’s repeal of California’s authority to set its own emissions standards. The suit argues that the congressional vote unlawfully revoked longstanding rights granted to California under the 1970 Clean Air Act. Environmental groups, including the Sierra Club, denounced the decision as a regressive step that prioritizes fossil fuel interests over public health and climate progress. “The Trump administration’s attack on clean air and clean vehicles only benefits the fossil fuel industry,” said Sierra Club’s Katherine García, warning the rollback would result in increased pollution and higher fueling costs for consumers.
Further deregulation may be forthcoming. The U.S. Department of Transportation has signaled it will soon release revised fuel economy rules to replace the Biden-era targets, which required automakers to achieve an average of nearly 50 miles per gallon by 2031. That standard was a cornerstone of President Biden’s climate agenda and a key component in the push for greater EV adoption. Trump’s revisions are expected to relax those requirements, extending the timeline and reducing penalties for noncompliance — a move that could save automakers billions but also delay emissions reductions.
Taken together, Trump’s policy shift represents a broad reversal of federal support for electric vehicles and emissions regulation. It repositions the U.S. toward a more fossil-fuel-friendly framework and increases pressure on foreign manufacturers to localize production or face steep economic consequences. While some automakers may welcome the regulatory reprieve, others warn that these swings in policy — especially on such short timelines — make long-term planning nearly impossible. For an industry still recovering from pandemic-era supply shocks and chip shortages, the latest changes inject a fresh round of uncertainty into what was already a volatile landscape, and don’t forget Covid, that was a real auto industry disruption.
As the July tariff deadline looms and court challenges mount, the auto industry is now navigating not only consumer preferences and technological transformation, but also a politically charged tug-of-war over who decides what Americans drive — and where those vehicles are built.