The Trump administration's proposal to roll back fuel economy rules is projected to cost drivers more in fuel than they save on vehicle prices.

Relaxing these standards may cause U.S. automakers to lose their competitive edge in the growing global electric vehicle market to foreign competitors like China.

Following the proposal, several major U.S. automakers have scaled back their investments and plans for electric and hybrid vehicles.

Weaker fuel standards may make American drivers more vulnerable to fluctuations in global oil prices.

The Trump administration believes rolling back fuel economy rules will save American car buyers big time. However, its proposal will actually prove much more expensive than the higher fuel standards they replace – making American drivers more susceptible to gasoline price swings and American automotive companies less competitive. 

Gasoline prices have jumped 50 cents a gallon in the days since the war on Iran began – another replay of geopolitical risk from foreign oil producers hitting U.S. drivers at the pump. Under the administration's proposal, new gas cars can consume more fuel, meaning swings in gas prices will hit drivers harder.

While lowering miles-per-gallon requirements may lower car prices and boost U.S. automaker profits over the next few years, consumers will pay more through higher bills at the pump. The move also puts a key American industry at greater risk by handing the growing global market for electric vehicles to China, a risk Ford CEO Jim Farley has described as an “existential threat.”

Dropping fuel standards brings unintended consequences

The administration’s proposal, called the “Freedom Means Affordable Cars” standards, promises to save consumers $150 billion from lower prices on new cars, SUVs and trucks. However, those cheaper gas-guzzling vehicles will cost drivers $185 billion to fuel – and that’s just in the first three years of ownership.

The “savings” show up on the sticker, but the bill comes due at the pump.

The Trump administration has pledged not to impose costly new rules. To make the fuel standards rollback add up, it claims automakers would redirect spending into new features worth $119 billion to drivers.

The Department of Transportation concedes it previously deemed this kind of assumption too uncertain to count, and for good reason: The upgrades are unspecified, and there’s no clear link between weaker standards and consumer benefits.

Without that $119 billion placeholder, the proposal’s costs outweigh its benefits.

Short-term gain leads to long-term pain

U.S. automakers clearly see this shift as a chance to turn higher profits in the short run, but it risks handing our global competitors the edge in the fast-growing worldwide EV market. 

After the DOT proposed its new fuel economy standards in December, automakers swiftly backpedaled on their electric vehicle plans.

Ford announced a $19 billion write-down as it repurposed EV plants. General Motors announced a second, $7 billion write-down, after taking $1.1 billion in charges for delayed EV programs. Stellantis canceled its Jeep and Chrysler plug-in hybrid models.

To be fair, this is not just due to easier fuel economy standards but also to other actions by the Trump administration ‒ such as ending the federal EV tax credits, cutting tax credits for chargers, the Environmental Protection Agency’s repeal of tailpipe emission standards, and legislation ending California’s ability to set stricter emissions standards that 11 other states follow.

Chinese carmakers see an opening, even with tariffs. On the same day as GM’s second write-down, Chinese auto giant Geely – which owns Volvo, among other brands – said it was exploring bringing its all-EV Zeekr and Lynk & Co brands to the United States.

China now dominates the global EV market, accounting for more than 70% of worldwide production, and rising. Meanwhile, U.S. automakers are swiftly losing ground in China as domestic EV makers take share.

Selling fewer vehicles in China raises the cost per unit of the vehicles U.S. automakers sell at home, because engineering costs get spread over fewer units.

There’s no question that EVs generally still cost more to produce than traditional gasoline-powered vehicles. It also costs money to make gas-powered vehicles more fuel-efficient.

Lightweight materials, like the Ford F-150’s aluminum truck bed, and stop-start systems that prevent fuel use while idling modestly raise the cost of building a new car or truck.

Yet walking back fuel economy standards will not only make owning a car more expensive; it also risks ceding the field to foreign automakers, especially Chinese companies, and leaves American drivers more exposed to oil price swings.

Consumers want electric vehicles, even if Trump doesn't

EV sales continue to rise in the United States and around the world. With battery costs falling, EVs are likely to be the same price or cheaper than gas cars in a few years.

The world market is clearly moving to EVs while America is downshifting to gasoline-powered cars. This is unlikely to end well for U.S. consumers or automakers.

A return to sound cost-benefit math for a proposal such as the Trump administration's would make the case to abandon the proposed rule crystal clear. 

Former Transportation Secretary Anthony Foxx is the Emma Bloomberg Professor of the Practice of Public Leadership at the Harvard Kennedy School. Elaine Buckberg, former chief economist of General Motors, is a senior fellow at Harvard University's Salata Institute for Climate and Sustainability.

© USA TODAY