Shortly after starting his second term, President Donald Trump urged the American auto industry to help realize his dream of a domestic manufacturing revival. He began by promising untold riches from tariffs on foreign automakers.

“Congratulations, if you make your car in the United States, you’re going to make a lot of money,” Trump told NBC News in March 2025. “If you don’t, you’re going to have to probably come to the United States, because if you make your car in the United States, there is no tariff.”Trump cast himself as a friend to American carmakers. But it didn’t take long for him to show how unpredictable that friendship could be — and how much it could threaten their bottom line.

In less than two years, three major policy decisions from the Trump administration have left the American auto industry in a worse position than it had been in 2024, struggling to keep pace with Chinese electric-vehicle makers, paying more for materials and facing weaker demand for traditional gasoline-powered vehicles.

Step 1: The attack on electric vehicles The shift toward electric cars was already underway when President Joe Biden took office, but he helped nudge it along.

The Biden administration encouraged automakers to build EVs by imposing stricter fuel economy standards for gas-powered cars and creating a $7,500 tax credit to help consumers buy electric.

Foreign automakers were gaining ground in the U.S. market, and Detroit’s Big Three saw affordable EVs as a chance to win customers back. They bet heavily on that future, building battery factories and rolling out scores of new models. For a while, sales surged.

The transition proved harder than automakers had hoped. As Biden left office, EVs remained too expensive for many buyers, and demand was not growing fast enough to justify the industry’s ambitious plans. Still, American automakers were willing to wait. Before Trump returned to the White House, Ford, Stellantis and General Motors asked him to keep the EV mandates in place.

Trump ignored the request, pulling away the supports that had helped the market grow. His administration paused $3 billion in federal funding for a program to expand charging stations. Then, in the summer of 2025, Republicans scrapped the $7,500 tax credit for EV buyers.

The president, however, threw his support behind Tesla, the EV automaker run by billionaire Elon Musk, who served as the chief architect of the chaotic Trump-backed effort to downsize the federal government. At one point in March 2025, Trump turned the White House grounds into a makeshift showroom featuring Tesla vehicles and bought a red Model S at market price. The presidential stamp of approval though did nothing to end the 40% freefall in Tesla’s share prices through the spring. Meanwhile, Detroit’s automakers were left scrambling to change course.

They took $52 billion in losses on their short-lived push toward an electric future. Stellantis, the maker of Jeep, accounted for about half the total. Ford discontinued its all-electric F-150 Lightning pickup — the same truck Biden had once taken for a spin. “Instead of plowing billions into the future knowing these large EVs will never make money, we are pivoting,” Ford CEO Jim Farley told The Wall Street Journal in December.

Step 2: Impose tariffs Next came the tariffs.

Trump quickly revived the trade wars from his first term, imposing taxes on imported cars starting in March 2025. Some auto parts qualified for an exemption under the U.S.-Mexico-Canada trade agreement his first administration negotiated in 2020.

But the tariffs still raised costs for American-made cars, which rely on imported parts and raw materials. Steel and aluminum — two essentials of carmaking — were hit with steep tariffs too. Trump seemed to focus on the promised benefits while overlooking the bill his policies were handing automakers.

“They’ve come a long way. It’s amazing what tariffs will do for GM and what the [2024] election has done,” Trump said in late July, standing alongside General Motors CEO Mary Barra and other executives at a company proving ground in Michigan. “General Motors is doing fantastic … we’ve been very good to General Motors.”GM’s own financial disclosures told a less triumphant story. The company reported to the Securities and Exchange Commission that tariffs could cost it as much as $3.5 billion in 2025. GM also pulled back on its EV manufacturing plans, though it continued to offer a dozen electrified models.

Step 3: Start a war with Iran The final link in the chain was the war with Iran. The conflict disrupted oil shipments through the Strait of Hormuz, pushing Brent crude past the dreaded $100 a barrel. As gas prices climbed, more drivers began looking again at electric vehicles — the very market Detroit’s automakers had scaled back.

The shift is happening around much of the world. Ember, a clean-energy think tank, reported record EV sales this year in 49 countries, including Germany, New Zealand, Chile and Uruguay. The contrast with the United States is stark: U.S. EV sales fell about 31% in the first eight months of 2026, according to Reuters.

China, meanwhile, has made major strides in the global shift to electric vehicles. Its automakers are expanding into new markets, including Canada, where Prime Minister Mark Carney struck a deal with Chinese leader Xi Jinping earlier this year to open the market to Chinese EVs. The American auto industry wanted an ally in Trump.

Instead it got tariffs that raised costs, a weakened domestic EV supply and a future outlook clouded by uncertainty.

This is a preview of MS NOW’s Project 47 Newsletter. As President Trump continues implementing his ambitious agenda, get expert analysis on the administration’s latest actions and how others are pushing back sent straight to your inbox every Tuesday. Sign up now.