2026 started out with a bang. Early in January, U.S. forces seized Venezuelan President Nicolás Maduro and his wife, Cilia Flores, arresting them for narcoterrorism. Public statements quickly revealed that the underlying objective of the attack was to gain access to Venezuela’s vast oil reserves.
Abroad, the U.S. is pursuing oil supply, while domestically, policies have shifted to perpetuate oil demand. In the pursuit of energy dominance through a return to fossil fuels, regulations driving clean energy and transportation technologies–such as the Clean Air Act California Waiver, EPA Greenhouse Gas Emissions Standards (and related Endangerment Finding), and most recently, Corporate Average Fuel Economy Standards–have been rescinded, rolled back, or proposed to be weakened. Billions of dollars in incentives, programs, and funding for clean energy and transportation have been paused, eliminated, or canceled.
The current policy landscape incentivizes manufacturers to build inefficient, high-margin gas-guzzlers, a short-sighted approach that will result in U.S. automakers falling further behind other carmakers as global markets continue their shift toward electrification. In addition to the about-face on clean vehicle policy, tariffs on auto parts have added complexity and cost to manufacturing vehicles in the U.S. and are expected to add thousands of dollars to the price of every new vehicle.
Indeed, the United States’ recommitment to oil, combined with current tariffs on auto parts, may ultimately cost the U.S. its auto industry. On January 14, 2026, Ford CEO Jim Farley announced that the era of the globalized auto industry is over. While that may be true for the U.S. auto industry, it certainly isn’t for foreign manufacturers.
Explosive growth in EV sales has transformed the global auto industry, moving EVs from a niche market to 25% of the global vehicle market in only five years. In 2025, global EV sales grew by 20% to 20.7 million vehicles (more than ALL the vehicles sold in the U.S last year). In 2023, China emerged as the world’s number one auto exporter, bolstered by definitive, consistent industrial policies, easy access to capital, and hundreds of billions of dollars in government subsidies. Chinese firms have strategically acquired mines for battery minerals, invested in global supply chains, and now dominate global mineral processing and refining.
To compete globally on EVs, Congress passed the Inflation Reduction Act (IRA) in 2022, investing billions of dollars in battery technology, advanced manufacturing, EV incentives, and infrastructure to support what was poised to be the greatest industrial transformation in our lifetimes. This approach was critical to keeping the U.S. auto industry, particularly the legacy manufacturers, competitive in a rapidly evolving market.
With the change in administrations a year ago, many of the IRA provisions were undone, leaving Detroit automakers high and dry. Cleantech commitments were eliminated; instead, the policy landscape shifted to tariffs on foreign imports, deregulation, and increased fossil fuel subsidies. Not surprisingly, the current approach has been a boon to oil and gas interests.
Since transportation accounts for nearly 67% of U.S. oil consumption, EVs pose an existential threat to the oil industry. As EV market share grew, gas car sales began to decline in 2018, reducing oil demand and threatening hundreds of billions of dollars in annual oil profits. U.S. oil consumption peaked in 2019, fell during the COVID pandemic, and hasn’t recovered since.
In response, oil and gas interests spent over $154 million lobbying lawmakers and nearly $40 million in campaign donations to members of Congress during the 2024 election cycle. These efforts paid off. Congress’s July 4th budget bill expanded $31 billion in annual U.S. fossil fuel taxpayer subsidies by another $4 billion.
At the same time, clean energy and advanced manufacturing loan programs, tax credits, and grants supporting clean energy and transportation were ended or left unpaid through pocket rescissions. This effectively pulled the rug out from under the U.S. auto industry, costing GM and Ford $27 billion to abandon EV plans and more broadly costing Americans 165,000 clean energy jobs while making it more difficult for U.S. consumers to access EVs.
With automaker support, regulations limiting tailpipe pollution and allowing states to set more stringent emissions standards have also been rolled back, rescinded, or proposed for repeal. Most recently, the National Highway Traffic Safety Administration (NHTSA) proposed drastic rollbacks of the Corporate Average Fuel Economy (CAFE) standards. CAFE standards have been in place since 1975, requiring automakers to manufacture more efficient vehicles over time. The watered-down rule argues that allowing less fuel-efficient vehicles saves car buyers money, but tariffs on parts will inflate new car prices far more than compliance with fuel-economy standards. Plus, any potential savings will be short-lived, as consumers will need to increase their gasoline spending, marking another win for oil and gas interests.
To respond to the complex and ever-changing regulatory and policy uncertainty, the auto industry is slowly turning the ship back toward building larger, high-margin gas-burners. The auto industry has long product cycles; it takes years to design and plan for new vehicle models, and factories can take years to retool. By removing the support system that helps automakers transition to electric vehicles, the federal government has disrupted manufacturers’ progress in developing and producing EV technology.
The current policy landscape props up gasoline demand while seeking to expand oil supply abroad, including through actions such as the Venezuela intervention. This approach is fundamentally misaligned with global markets. EV adoption is accelerating worldwide, and without domestic support, U.S. automakers will continue losing market share and technological leadership—until they are reduced to a regional presence, as Ford’s Jim Farley warned.
But even a regional market may be out of reach for U.S. automakers if they don’t shift gears to EVs. Canadian Prime Minister Mark Carney just announced a trade deal with China that will introduce inexpensive EVs in Canada this year. Despite tariffs, the Chinese EV market in Mexico has taken off, driven by incentives and unbeatable prices. Even one of Latin America’s most closed economies, Argentina, just welcomed a huge shipment of over 5,000 EVs from Chinese automaker BYD. In Australia, Chinese auto brands have filled a void left by Ford and GM and now supply 17% of the market. The BYD Shark has recently become Australia’s best-selling personal pickup truck.
Short-sighted policies favoring oil interests are undermining the U.S. auto industry, and as Farley put it, “We know we’re in a fight for our lives in our industry.” The sharks are circling.
