Updated March 28, 2025 to include the impact of other countries’ value-added taxes (VATs) on U.S. exports. Jump to the update →

This document will be periodically updated as new questions arise. 

During his presidential campaign, President Trump pledged to impose universal tariffs of 10–60% on all U.S. imports—a whopping $4.2 trillion in goods and services purchased from abroad in 2024. This was always a real possibility.

The International Economic Emergency Powers Act gives the president broad authority to do so. In early February the Trump administration seemed to be making good on the threat to enact extremely high and broad-based tariffs. They announced tariffs of 25% on all goods from Mexico and all goods (except energy goods) from Canada, as well as tariffs of 10% on all goods from China, though ultimately punting on action against our neighbors for one month. These three countries combined account for over 40% of goods imports to the United States. Tariffs this high and applied to such a broad scope of U.S. imports would have constituted a highly significant change in economic policy. Almost immediately, the Mexican and Canadian tariffs were suspended for a month. Yet, all this highlights that historically large and broad-based tariffs remain a very possible policy outcome in the coming years.

This FAQ provides information on the likely effects of these tariffs and, crucially, the effects that will not occur due to these tariffs. First, let’s define it. 

What is a tariff? 

A tariff is a tax levied on imports to the United States. By raising the cost of foreign-produced goods or services relative to U.S.-produced ones, a tariff redistributes some of the benefits of trading from U.S. consumers and foreign producers to U.S. producers of import-competing goods, allowing domestic businesses to also raise prices. In this way, a tariff acts as a tax on consumption as well as allowing import-competing businesses to raise prices without losing market share to foreign producers. Until recently, tariffs on U.S. imports averaged 2.2% in accordance with numerous international agreements negotiated by the U.S. government–though many items entered tax free.

Can tariffs ever be effectively used to target smart policymaking goals?

In brief: Yes. Tariffs can do a number of useful things. Three broad uses include: 

• providing effective protection for domestic production in specific economic sectors 
• shielding U.S. workers from unfair forms of competition from specific trading partners (like those with abusive labor rights regimes)
• complementing a country’s strong domestic climate policy when trading partners’ policies are not as strong

Because tariffs are most effective when they focus on well-defined and narrowly tailored goals, they work best as part of a larger strategy.

In detail: The most direct benefit of tariffs is protection for domestic sectors in the U.S. economy that warrant strategic support. For example, some sectors are harmed when our trading partners take actions to support their own domestic exporters or undercut labor and clean air and water standards, or are critical for economic or national security. As a recent example, U.S. steel and aluminum producers have faced chronic global oversupply that has largely been caused by subsidies (direct and indirect) that trading partner governments have given their own domestic producers—who are among the world’s worst polluters.

As part of a strategic suite of complementary industrial policies, tariffs can help sustain and support the development of key industries and maintain them during periods when trading partners are engaged in market-distorting subsidization of their exports. Tariffs can help correct these pervasive distortions and improve economic efficiency, allowing firms to thrive in the face of these distortions.

Other reasons for wanting to target more domestic production from specific sectors include national security concerns, the underinvestment of private actors in the resilience of key nodes of supply chains, and combating monopolization of key inputs by another country—a lesson learned painfully during the COVID-19 pandemic when everyone was scrambling to source personal protective equipment (PPE), respirators, and critical medicines unavailable domestically at the necessary scale. Tariffs can help internalize the social costs of fragile global production chains otherwise created by profit-maximizing corporations. In short, tariffs are a valid, and often useful, industrial policy tool that can provide narrow and targeted protection for key sectors. 

Tariffs can also be used to shield U.S. workers from low-road practices (like labor abuses) among trading partners. For example, if tariffs were higher for countries that routinely failed to protect workers’ fundamental rights (or if tariffs were lowered when a country made a genuine commitment to protect these rights), the benefits of pursuing international competitiveness through wage suppression would be reduced.

Similarly, tariffs could also be useful in complementing high-road competition in environmental standards, for example by embedding the costs of greenhouse gas emissions (GHGs) from manufacturing and transportation in low-standard countries. This would incentivize clean air while also making sure U.S. workers in trade-exposed, energy-intensive industries do not bear the extra burden of adjusting to new climate policies. An approach that explicitly used tariffs to internalize the social costs of labor and environmental exploitation in low-standard countries would help correct these problems and provide transparent incentives for countries to pursue pro-worker and pro-environment policies.

These uses are not trivial: Tariffs are absolutely a key tool of smart industrial and trade policy. But on their own, tariffs cannot and should not be the centerpiece of a national economic strategy. Doing so would represent a gross overuse of a tool for a task it’s not suited for and would cause damage to the wider economy.

Can high and broad-based tariffs fix the U.S. trade deficit or rebuild manufacturing employment?

In brief: No, mostly because high and broad-based tariffs will also reduce exports along with imports, and this will leave the balance of trade mostly unchanged. Exports fall when tariffs are introduced for a number of reasons. The first is that many U.S. exports use imports as intermediate inputs to final goods produced in the United States. Making these inputs more expensive with tariffs will boost the price of these U.S. exports and make them less competitive in global markets. Second, trading partners are highly likely to retaliate to U.S. tariffs with tariffs of their own, making exports more expensive in international markets—which we’ve seen on “Made in America” goods from Boeing airplanes to Kentucky bourbon. And finally, tariffs will put upward pressure on the value of the U.S. dollar in global markets, which will make our exports more expensive and will increase the attractiveness of imports to U.S. customers—primary causes of U.S. trade deficits and manufacturing job losses.

In detail: It is true that unbalanced trade has suppressed employment in manufacturing in the United States for decades. We consistently import far more manufactured goods than we export (and the difference is nowhere near made up in the services trade). This trade deficit drives a wedge between domestic consumption of manufactured goods and domestic production. Closing this trade deficit would, hence, substantially boost job opportunities in the manufacturing sector in the U.S. However, large and broad-based tariffs on all manufactured imports will not do much to close this deficit for several reasons.

First, many U.S. exports are produced using a large share of imported inputs. The slicing of global value chains in recent decades means that parts of a final good are often sourced from several different countries. Tariffs would, hence, make these inputs more expensive, and this would, in turn, push up the price of U.S. exports using these inputs, weakening the competitiveness of U.S. exports in global markets.

Second, and most obviously, tariffs are rarely unidirectional. When we impose tariffs, our trading partners are likely to retaliate with reciprocal tariffs on U.S. goods, pricing U.S. exporters out of international markets. This is not speculative—it absolutely was the result of the tariffs imposed during the first Trump administration.

American farmers and ranchers incurred the most widespread damage from this retaliation following the 2018 tariffs. The damage was so great that the Trump administration authorized $61 billion in emergency relief payments to cushion farmers and ranchers from the blow of this retaliation, an amount roughly equivalent to all of the tariff revenue collected from U.S. businesses. Big manufacturers like Boeing also lost access to international markets. Prior to 2018, China accounted for 25% of Boeing’s sales, but after the tariffs, China stopped ordering Boeing aircraft and created an opening for China’s homegrown COMAC C919—a direct competitor to Boeing’s 737 series planes. Not only will U.S. exporters lose markets abroad, but the lost exports will increase the supply of their goods to U.S. markets, putting downward pressure on the price of goods they sell domestically, reducing corporate profits.

Third, large and broad-based tariffs would put upward pressure on the value of the U.S. dollar, making U.S. exports more expensive to foreign buyers and imports cheaper and more attractive to U.S. businesses and consumers. This often happens as trading partners intentionally push down the value of their own currency against the dollar through exchange rate management policies to offset the competitive ground lost in U.S. markets to the new tariffs.

But it will also happen essentially mechanically. Countries use the dollars they earn from importing to the United States to purchase exports from the U.S. If tariffs reduce the dollars countries earn from importing to the U.S., this will either lead them to reduce what they purchase as U.S. exports, or they will need to purchase dollars on international capital markets in order to maintain their level of U.S. export purchases. This increased demand for dollars in these capital markets will push up demand for dollars, and the exchange rate will increase.

Again, this is not speculative—it is exactly what happened in 2018 in response to Trump’s first-term tariffs on Chinese technology goods and broader steel and aluminum imports, when China depreciated its currency by roughly 10% against the dollar. Against an international basket of currencies, the dollar rose by about 7.5%. Already since the November 2024 election, the value of China’s currency has fallen 1.1% against the dollar.

As a result of these influences, the U.S. trade deficit—how much we export minus how much we import—saw no improvement through the first Trump administration even as tariffs were increased. The tariffs did work to change the composition of the trade deficit as Chinese exporters sought to circumvent U.S. tariffs on Chinese goods by rerouting trade and expanding investment in third countries—in particular, taking advantage of the U.S.-Mexico-Canada trade agreement negotiated by President Trump to use Mexico as a platform to export to U.S. markets. Since the 2018 tariffs took effect, imports from Mexico have increased 63%, and the U.S. trade deficit with Mexico increased by 159%.

Reducing damaging trade deficits cannot be achieved solely through trade policy—except in the extreme case where trade policy measures are so severe that they essentially shut down all international trade, which would cause radical disruption to the U.S. economy. Instead, more balanced trade will only result from macroeconomic policies that are consistent with lower trade deficits—including exchange rate management to realign an overvalued U.S. dollar and a reasonable mix of fiscal and monetary policies.

Are tariffs the same as an industrial policy for the United States?

In brief: No, tariffs are only one tool in the industrial policy toolkit, and they need supporting policies in strategic endeavors to effectively boost domestic sectors.

In detail: Tariffs, on their own, are an incomplete industrial policy strategy, even for the narrow goal of supporting a strategic domestic sector. New research confirms the efficacy and pervasiveness of industrial policies when applied strategically. While these policies can take a variety of forms, all successful industrial policies do three main things, mostly aimed at addressing key market failures:

• promote positive economic spillovers that provide economic benefits beyond the targeted industry—such as by creating innovation that benefits other industries or by supplying complementary goods or services that make other investments viable—and limit or abate negative economic spillovers that impose costs on other industries, consumers, or the public. For example, industrial policy to intentionally spread out the production of key inputs like semiconductors so that bottlenecks specific to a single country don’t choke global supply chains in the future creates the positive externality of resilience—left to their own private profit-making devices, individual companies will not have the incentive to make these investments.
• provide complementary and industry-specific public inputs. Key examples include infrastructure, research and development, and workforce development investments that complement and crowd-in private investment.
• provide coordination of disparate actors where complementary and collective actions are needed for an industry’s success, but market mechanisms are incapable of playing this role. One example of this is publicly provided monitoring of potential supply-chain stresses to keep private actors informed of how they can plan deliveries and marshal inputs to solve blockages before they happen. Industrial policy can also provide market-creating guarantees to crowd investment into cutting-edge technologies that individual investors might consider too risky to support, such as the COVID-19 vaccine development. 

Tariffs can be part of this formulation when there is a compelling public interest to support a particular industry. But they are insufficient on their own to ensure that industries critical to U.S. economic and national security—from primary metals, to critical medicines and health equipment, to semiconductors and other advanced technologies—can overcome market failures and unfair competition.

Tariffs change the price signals in markets from which investors decide to shift resources between different sectors. But price signals alone are often not sufficient to ensure key market failures are overcome. But there are many market failures besides getting prices wrong that domestic capital owners and workers need to overcome in order to be willing to invest in producing in tradeable goods sectors.

At the technology frontier, by definition, no one knows the likelihood of success in achieving technological advances or what the market potential is for such innovation—although technological progress is highly desirable, the potential risks and rewards cannot be accurately priced. Another example is where complementary investments are needed to make an individual investment financially viable, such as the need to upgrade electrical grids and build charging infrastructure for investments in electric vehicle manufacturing to be viable. Further, because it’s easy to change tariffs on short notice, capital owners and workers are unlikely to see tariffs alone as a sufficient signal that they should make costly, long-term investments in the production of tradeable goods.

Who ‘pays for’ tariffs imposed on U.S. imports?

In brief: American households will bear most of the burden of higher tariffs. This will mostly come through higher prices for imported goods and, crucially, higher prices for domestic goods that compete with imports.

In detail: Tariffs are a tax on imported foreign goods and services. The legal incidence of these taxes falls on the U.S. company doing the importing. If a company imports $100 worth of goods and tariffs are 20%, the company must pay a tax of $20 to the federal government. However, one of the useful insights of economics is that the legal incidence of a tax and the economic incidence are different. Taxes set off a cascade of adjustments that can spread or concentrate their ultimate economic burden. In the case of tariffs, these adjustments essentially lead to U.S. households paying higher prices. Importers who pay the tax initially will typically raise prices to pass this additional cost along to consumers, known as “price pass-through.” The precise degree of pass-through will differ by good and sector: It is driven largely by factors such as the degree of a company’s market power and consumer sensitivity to price changes. But substantial research convincingly demonstrates that it is U.S. households who ultimately pay for tariffs.

It is important to note that if tariffs do not raise prices in the U.S. market, they will not shift consumer preferences to domestic goods from foreign goods, thereby failing to provide any useful protection to domestic industries. And if they are not providing effective protection to domestic producers, it is hard to see the point of imposing them. Tariffs provide effective protection to domestic producers by raising U.S. prices of foreign goods and services relative to similar domestically produced goods and services. This enables companies producing import-competing goods in the United States to raise prices, too, without fear of losing market share to lower-priced foreign competition. These higher prices enable domestic firms to maintain or expand production at a viable scale.

Because the tariff on a competing foreign good does not change a U.S. company’s production costs, in the short-run, the higher prices U.S. consumers pay for import-competing goods go directly into higher profits for the company. In the longer-run, and with complementary supporting policies, some of those profits might be redirected to investment and wages as the import-competing sector looks to expand its output.

What’s more, for goods that the United States does not or cannot produce domestically at adequate levels to meet demand, tariffs raise prices for U.S. consumers and businesses without giving a boost to domestic industries. This includes a wide range of agricultural goods (e.g., coffee, avocados, and bananas) and commodities and minerals that are relatively scarce in U.S. territory. Tariffs on imports that do not compete with “Made in America” goods simply raise prices for U.S. consumers without spurring domestic production of these goods. They represent a pure cost to U.S. consumers without any countervailing benefit.

Should policymakers try to make tariffs a significant revenue source for government spending?

In brief: No. Tariffs are essentially a tax on consumption and are, hence, more regressive than most current federal revenue sources. This means that with tariffs, people with lower incomes will pay a larger share of their earnings in taxes than high-income people. For the significant amount of revenue we need to raise in the coming years, we should build on the existing progressive revenue sources we have (income and estate taxes) and institute new progressive taxes.

In detail: President Trump has suggested that tax revenues from new tariffs could replace the federal income tax. This would require tariffs to reach historically high and broad levels and would constitute a large, regressive shift in who finances the federal government. In this scenario, the tax burden would shift from higher-income households to low- and moderate-income households. Large, across-the-board tariffs of this magnitude would also have many negative economic side effects relative to income taxes.

In 2024, the federal government will collect an estimated $2.5 trillion in individual income tax revenues. To raise this much revenue, the base of any tariff would have to be extremely broad—effectively universal, falling on all imports. If one starts with the implausible assumption that a universal tariff would not change U.S. demand for imports, the tariff rate would need to be 78% to replace the individual income tax. More realistically, if tariffs deter Americans from importing goods, then these taxes on imports would need to be significantly higher to replace income tax revenues. In fact, most estimates of how sensitive U.S. purchases of imports are to their prices indicate that tariffs literally could not replace even half of the income tax.

Further, even if tariffs could somehow replace income tax revenue one for one, this would be an extremely damaging shift for most U.S. families who would end up paying a greater share of their incomes in taxes. Revenues from progressive income taxes are preferable to those from tariffs for a few reasons.

First, tariffs are a regressive tax, meaning people with lower incomes will pay a larger share of their earnings in taxes than high-income people. Tariffs are essentially a consumption tax, and consumption as a share of income tends to fall as incomes rise.

Second, progressive taxation achieves more than merely raising revenues to fund essential public services supplied by our government from those who are most able to pay—it also creates incentives that shape economic behavior in socially productive directions. The runaway growth of incomes for top earners are driven by rent-seeking practices—income gained from the exploitation of power that is unrelated to an individual’s contribution to overall economic growth. Progressive taxation disincentivizes such rent-seeking among those with power and instead allows incomes to be more broadly dispersed. This disincentive effect of the federal income tax has been greatly eroded since the 1980s as top marginal rates have fallen, but relative to a scenario with no income tax, it is significant and worth preserving.

Finally, tariffs lead to efficiency losses as the potential benefits of international specialization are lost. At tariff levels that have persisted for the past 70 years, these efficiency losses are quite small (and often very exaggerated by economic commentary). But at tariff levels needed to replace the federal income tax, these efficiency losses would be high. Progressive income taxes also have some distortionary effects that might reduce economic output, but they also have countervailing influences that might boost economic output and welfare. For example, by raising revenue from the rich and financing federal spending targeted toward low- and middle-income families, this progressive redistribution supports growth in economywide demand. Again, richer households save higher shares of their income, so, redistribution away from them boosts spending. Substituting tariffs for progressive taxation forgoes these economic benefits beyond tax revenues.

Are tariffs easier and more transparent to collect than other forms of taxes?

In brief: No, tariffs involve multiple compliance costs, and across-the-board tariffs will offer many more chances for corrupt dealing than exist under current taxes.

In detail: In 2018, tariffs imposed under Sec. 301 and Sec. 232 authorities by the first Trump administration included a process whereby importers could petition for tariff exclusion. Essentially this provided a huge new tax loophole for politically connected large companies to exploit. In total, the Trump administration granted more than 100,000 exclusions from the tariffs. Audits by the U.S. Government Accountability Office and the Department of Commerce’s Inspector General found the exclusion petition processes were plagued by a lack of transparency, followed capricious and inconsistent internal procedures, and issued contradictory and seemingly arbitrary decisions.

New empirical research indeed confirms that tariff exclusions have been used systematically to reward political contributions, as well as to punish political opponents, rather than to accommodate economic need. In one instance in 2019, Apple lobbied President Trump to secure exemptions for iPhone imports from China and pledged to repatriate some Mac computer manufacturing from China to the United States, though they never delivered on this promise. The scope of companies that will be incentivized to apply for exclusions (and potentially offer improper favors in exchange for them) and the financial benefit of avoiding tariff charges will grow enormously if the Trump tariffs that were promised during the campaign actually come to pass.

Will the impact of tariffs on consumers vary a lot across U.S. states?

In brief: Not a lot—the effect of tariffs on consumers’ purchasing power will mostly depend on the share of consumer spending on categories of goods and services facing new tariffs. This doesn’t differ widely by state—consumers in California, for example, aren’t necessarily more likely to spend vastly more money on durable goods or food (products facing high new tariffs) than consumers in Montana. Essentially, residents of all states are in the same boat when it comes to these price increases.

In detail: Tariffs are a tax on imports that, in effect, redistribute “surplus” from U.S. consumers and foreign producers to subsidize domestic producers of import-competing goods. When used strategically to support specific sectors, tariffs can be an effective tool of industrial policy—but consumers will face lower purchasing power as a result.

The effects of these price increases from tariffs will be mostly uniform across states. Below, we provide a rough estimate of the potential impact on U.S. consumers’ purchasing power in each state from President Trump’s new tariffs on Canada, Mexico, and China implemented on March 4, 2025. These tariffs apply a 25% tax on goods imported from Canada and Mexico, except for Canadian energy products that will be taxed at 10%, and raise tariffs on goods imported from China from 10% to 20%. On March 6, President Trump suspended these tariffs on many Mexican and Canadian goods for one month, but given that the administration has now twice announced and backed down from these tariff threats, we thought calculating their potential impact if fully implemented would be a useful addition to the policy debate. The final estimates are shown in the map below.

To estimate the impact on consumers, we analyzed personal consumption expenditures in each state, decomposed into durable goods, non-durable goods, and services consumption from the Bureau of Economic Analysis, using the most recent available data from 2023. We applied research from Federal Reserve Bank of San Francisco economists that identifies the import content of consumer spending in each of these consumption categories and then estimate the tariff-impacted component of imported consumption.

The main variation in how one state’s consumers will face higher or lower costs from import tariffs hence depends on whether their consumption skews more or less toward those spending categories that are intensive in imports (i.e., goods). It is likely the case that states with high housing costs spend less (as a share) on goods and will hence face lower tariff costs, simply driven by the fact that housing is not import-intensive, and if it’s expensive it is by definition claiming a bigger share of personal spending in those states.

Finally, to present a dollar value of tariff costs per capita, we adjusted the prices of 2023 consumption to January 2025 prices—the most recent measurement available from the Personal Consumption Expenditures price index.

There are some estimates of import destination by state, but in the end, we did not use this information to allocate tariff effects. In this import destination data, Canada, Mexico, and China account for 43% of all U.S. imports, though there is considerable variation across states—from a mere 13% of total imports in Hawaii to 94% of all imports in Montana. However, many imports are intermediate inputs used as components in the production of more finished goods—just because something is imported to a state does not mean it will be consumed in that state. For example, 75% of Michigan’s imports are from these three countries, but much of this represents parts that will be assembled into cars and trucks sold all across the country. It’s not Michigan consumers alone who would face any particularly large cost increase from tariffs.

Finally, it’s important to note that this analysis only allocates the effect of new U.S. tariffs across states. The potential effect of retaliation from trading partners might be much more focused on particular states. These three countries are the top export destination for 45 states, but retaliation might not stop at restricting U.S. exports. For example, a possible response by Canada could be to raise electricity prices to the U.S. states supplied by Canadian generation. This is a small subset of states that would face much greater costs than others. Other responses could include reduced tourism, as Canadian Prime Minister Trudeau suggested, which would also be more concentrated in particular states.

Are other countries’ value-added taxes (VATs) an unfair barrier to U.S. exports?

In brief: No. Value-added taxes as they are administered in trading partners of the United States are neutral with respect to trade. They are not a barrier to U.S. exports and hence should not be penalized under “reciprocal” trade protection.

In detail: A value-added tax is a consumption tax on goods and services levied at each stage of the supply chain. Unlike sales taxes in many U.S. states and localities which tax the consumption of a good or service at its final user, a VAT levies taxes incrementally on each stage of production. President Trump’s February 13, 2025, Memorandum on Reciprocal Trade and Tariffs falsely claims that value-added taxes are “unfair, discriminatory, or extraterritorial taxes imposed by our trading partners.” President Trump has suggested treating VATs as a kind of tariff to be met with reciprocal tariffs from the United States. This is a mistake commonly made by people who don’t really understand how these taxes or trade work.

Economists and tax practitioners have long recognized that in theory VATs do not inherently affect international trade flows, as summarized by Nobel Prize-winner Paul Krugman and chief economic advisor to President Reagan Martin Feldstein. In practice, when VATs fall more heavily on tradeable goods (like manufactured goods) than on non-tradables (like housing and health care), they will reduce the size of a country’s tradeable goods sector, leading to reductions in both imports and exports. Further, if a VAT (which is a consumption tax) substitutes one for one for an income tax, this can increase national savings and hence provide a small boost to net exports. But these real-world twists on VATs still in no way constitute an unfair barrier to U.S. exports.

According to the International Monetary Fund, more than 160 countries use a VAT; the United States is somewhat of an outlier in relying on a single-stage retail sales tax to raise revenues from consumption. To illustrate how a VAT taxes each stage of production, imagine that a farmer sells wheat to a grain mill, which makes it into flour, which is in turn purchased by a bakery to produce bread for final sale to consumers. Under a VAT:

1. The grain mill pays a tax on the value of the wheat.
2. The bakery pays a tax on the value of the flour minus the value of the wheat (which has already been taxed).
3. Consumers pay a tax on the value of the bread minus the values of the wheat and the flour (which have both already been taxed).

The value taxed for consumers of bread under a VAT in the third step already embody the taxes paid for the values of intermediate steps—1) wheat and 2) flour—in the supply chain. In contrast to a VAT, a retail sales tax like in U.S. states levies a tax on the full retail price of bread because, as intermediate inputs to production, the wheat and flour are exempted from tax.

It is true that VATs are levied on goods and services imported to the VAT country and rebated on products that the VAT country exports. But this treatment is exactly what keeps VATs neutral with respect to trade flows. In effect, this works like existing U.S. sales taxes: U.S. exporters do not pay a U.S. sales tax on goods that are sold outside the U.S., but U.S. consumers do pay a sales tax on imported goods. Similarly, when a good is sold across state lines into a state with no sales tax, businesses pay no sales tax in the “exporting” state. And consumers in a sales tax state pay taxes for “imported” goods from another state. Levying a VAT on imports and rebating VATs on exports merely serves to give all products the equivalent tax treatment.  

In other words, with a VAT, there simply is no penalty for imports nor a subsidy for exports. Hence, other countries’ VATS do not constitute trade barriers that demand reciprocal protection from the United States.

Medium- and heavy-duty vehicles are a backbone of U.S. economic life. Transitioning these vehicles from internal combustion engines (ICE) to low- and no-emission technologies is a critical step for eliminating greenhouse gas and other toxic emissions from the transportation economy. At the same time, this transition could have serious implications for the ICE vehicle manufacturing industry and auto workers—as well as the steel and aluminum industries that contribute so much to vehicle manufacturing—that have long been hammered by outsourcing and offshoring, union-busting, and intensifying international competition.

If done right, the transition to manufacturing clean trucks and buses presents a rare opportunity to reverse these trends and revitalize long-beleaguered industries with expanding investment, creation of good jobs, and broadly rising incomes in the United States. If done wrong, the transition risks exacerbating the current trends that see companies moving production offshore or to U.S. states embracing anti-worker policies, threatening the security of the good jobs that remain.

Our report models potential economic futures for U.S. truck and bus manufacturing supply chains under a variety of policy scenarios through 2032. The results indicate three pillars are necessary to secure good jobs for legacy auto workers and new entrants to the workforce, and to ensure a robust future for truck and bus manufacturing in the United States. To win good jobs manufacturing U.S. trucks and buses, policymakers must:

1. Maintain a strong public commitment to low- and no-emission vehicle transition, including supply-side and demand-side measures to overcome endemic market failures in the development and deployment of new clean vehicle technologies.
2. Increase the domestic market share and domestic content share for clean vehicle components in made-in-America trucks and buses by tackling the problems of bad trade policies and strongly tying financial incentives to domestic content requirements.
3. Condition financial incentives for companies on creating high-quality jobs; institute penalties and clawbacks for companies that fail to meet their commitments to U.S. investments and good jobs; and prohibit participation in these programs for companies that can’t show “clean hands” with the National Labor Relations Board (NLRB), the Internal Revenue Service, and other relevant regulatory bodies.

On all three counts, President Trump is flooring it in the wrong direction. Reversing federal funding for clean vehicle manufacturers and consumers will eliminate the first pillar of a clean vehicle transition that promotes good jobs, stranding more than $145 billion in new U.S. manufacturing investments and accelerating the decline in market share for domestic truck and parts manufacturing.

The demand for clean trucks will still be there. Although Trump has nixed clean vehicle targets for future new sales, 35 other countries—along with U.S. states, cities, and a range of private-sector manufacturers, fleet owners and operators, utility and infrastructure providers, and capital investors—have pledged to reach 100% clean truck and bus sales by 2040. But without a sufficient U.S. manufacturing base and workforce, that new demand will be met by foreign suppliers. Legacy ICE producers will be faced with dwindling market share and deteriorating production economies squeezing profits.

Figure A illustrates the potential harm of repealing the clean vehicle incentives from the Inflation Reduction Act (IRA). Pulling supply- and demand-side supports from the industry would result in nearly half a million fewer clean energy trucks and buses produced domestically through 2032, relative to the baseline scenario. This would cost more than 35,000 job-years (a quantity requiring one person’s work over one year) in truck assembly and parts manufacturing of ICE and clean vehicles and shrink the industry by nearly $16 billion. Conversely, we find that continuing with federal support for clean vehicles and tightening content rules to increase domestic market share would result in an additional 112,000 trucks and buses made in the United States, and an additional 171,000 job-years.

Figure A

Trump’s track record on the other two pillars is similarly unpromising. Although he made trade competition a signature policy campaign of his first term, the situation facing medium- and heavy-duty vehicle manufacturing got worse. Trump renegotiated the North American Free Trade Agreement (NAFTA), but his United States-Mexico-Canada Agreement (USMCA) preserved the fundamental flaws that empower multinational producers to threaten and actually relocate work to lower-wage and more readily exploitable places like Mexico. Trump left gaping loopholes in USMCA’s “Rules of Origin,” allowing foreign content to enter duty-free into U.S. markets without offering the same market-opening to U.S. producers—a loophole ripe for exploitation by heavily subsidized Chinese producers. And when it came to Chinese producers, Trump’s Phase 1 trade deal failed to meaningfully address any U.S. structural economic concerns. Will Trump’s second term be any different? So far, his tariff bluster seems to be aimed more at leveraging tariffs for international bargaining over non-economic issues rather than protecting good jobs from unfair trading practices.

Since USMCA was signed into law, wages for U.S. motor vehicle production workers have fallen more than 7% after inflation. Meanwhile, U.S. imports from Mexico of medium- and heavy-duty trucks increased 500% and imports of motor vehicle parts increased 150%. After growing steadily since July 2009, overall employment in motor vehicles and parts fell in the first Trump administration while also shifting employment to states with lower wages and worker protections. Trump led relentless attacks on workers’ rights during his first administration, and when he had an opportunity to support striking autoworkers in 2023, he criticized them and spoke at a non-union factory. Now, the president is working closely with union-buster and Tesla, Inc. CEO Elon Musk, who could shape Trump’s policies to squeeze his competitors out of the marketplace.

Will Trump realize he is taking the wrong turn for the future of good jobs building trucks in the United States? Workers in truck manufacturing communities and the rest of the world awaiting critical climate solutions like clean vehicles will be holding our breath.

Glossary of acronyms and initialisms

BEV: Battery electric vehicle

CHIPS: CHIPS and Science Act of 2022  

EV: Electric vehicle

FCEV: Full cell electric vehicle 

ICE: Internal combustion engine

IRA: Inflation Reduction Act of 2022

MHDV: Medium- and heavy-duty vehicles, inclusive of Classes 4–8 trucks and buses

NAFTA: North American Free Trade Agreement of 1994

USMCA: United States-Mexico-Canada Agreement of 2020

Medium- and heavy-duty vehicles—big trucks and buses—are a backbone of economic life in the United States. Transitioning these vehicles from internal combustion engines (ICE) to low- and no-emission technologies is a critical step for eliminating greenhouse gas and other toxic emissions from the transportation economy. At the same time, this transition could have serious implications for the ICE vehicle manufacturing industry and auto workers.

The auto manufacturing industry was once a dependable source of good, union jobs capable of sustaining middle-class communities—particularly for workers without a four-year university degree. But these jobs have deteriorated in quantity and quality thanks to decades of corporate outsourcing and union-busting; bad trade policies; rising foreign competition; and short-sighted corporate governance strategies which caused the 2008 automotive industry crisis.1

Combined, these factors created a generation-long drain of jobs from U.S. motor vehicle industries, applying unrelenting downward pressure on the quality of jobs that remained with predictable reverberations to local economies that have borne the brunt of industry restructuring.2 After 2008, average wages in the industry fell sharply while corporate profits, executive compensation, and stock buybacks soared and crowded out investment in the technologies, manufacturing capacity, and workforce development to compete for the clean vehicle future.

Now that future is upon us. If done right, the transition to manufacturing clean trucks and buses presents a rare opportunity to reverse these trends and revitalize long-beleaguered industries to expand investment, create jobs, and raise incomes in the United States. If done wrong, the transition risks exacerbating the current trends that see companies moving production offshore or to U.S. states embracing anti-worker policies, threatening the security of the good jobs that remain.

This report assesses the potential impacts of a transition on employment, output, and labor incomes in clean truck and bus manufacturing supply chains by modeling a range of policy scenarios from 2024–2032 to understand what is required to secure a just transition for legacy auto workers and new entrants to the workforce. Our analysis shows that a just transition, broadly, must target three things:

1. Maintaining a strong public commitment to low and no-emission vehicle transition, including supply-side and demand-side measures to overcome endemic market failures in the development and deployment of new clean vehicle technologies.
2. Increasing the domestic market share and domestic content share for clean vehicle components in made-in-America trucks and buses by tackling the problems of bad trade policies and strongly tying financial incentives to domestic content requirements.
3. Ensuring that newly created jobs are good jobs with program requirements for companies receiving financial incentives to make them good jobs; penalties and clawbacks for companies that fail to meet their commitments; and prohibitions from participating in programs for companies that can’t show “clean hands” with the National Labor Relations Board (NLRB), the Internal Revenue Service, and other relevant regulatory bodies.

The transition toward clean trucks and buses began in earnest under the Biden-Harris administration, with the 2021 Infrastructure Investment and Jobs Act, 2022 Inflation Reduction Act (IRA), and 2022 CHIPS and Science Act making big strides towards the first target. Together, this legislation allocated billions of dollars toward supporting manufacturers to make low- and no-emission heavy-duty vehicles and components, supporting owners of public and private fleets to purchase them, and building charging infrastructure to power them.3 While the Biden-Harris administration sought to attach highroad labor and domestic content standards to the tax incentives, grants, and no-interest loans to promote clean vehicles, these fell by the wayside in legislative horse-trading needed to pass the U.S. Senate.4 As a result, the law provides policymakers little leverage to hold recipients of billions of subsidies accountable, significant shares of which are flowing to companies that do not meet domestic content requirements or are expanding investments in states with anti-worker policies, undercutting goals two and three.

Now, the Trump administration is moving to drastically reorient the federal policy approach to clean vehicles by freezing disbursement of support for clean vehicle manufacturing provided by the Inflation Reduction Act and other legislation.5 This would rob the resources necessary to incentivize rapid development of domestic clean vehicle manufacturing capacity at a time when consumer demand is shifting away from ICE vehicles.6 And although President Trump took some major actions on trade in his first administration, these failed to reverse the long-term decline in motor vehicle manufacturing jobs and communities, or to advance worker rights more broadly:

• Though pledging to fix the North American Free Trade Agreement (NAFTA), Trump’s United States-Mexico-Canada Agreement (USMCA) left in the fundamental flaws that allow multinational corporations to shift production to low-cost, low-standard locations and create loopholes to import foreign content into North American supply chains. Both bolster employers’ credible threats of outsourcing or closing plants to suppress wage demands from workers in U.S. (and Canadian) manufacturing facilities.
• USMCA’s leakage problem—allowing non-USMCA content to count as being “Made in North America” in qualifying for lower tariffs—undercuts U.S. and North American workers by pitting them in competition against non-USMCA producers with lower labor, environmental, and consumer safety standards and without extending reciprocal market access to similar U.S.-based producers. Under USMCA rules, such content can even qualify for U.S. taxpayer subsidies under IRA policies.
• Since USMCA was signed into law, wages for American motor vehicle production workers have fallen more than 7%, after inflation. Meanwhile, U.S. imports from Mexico of medium- and heavy-duty trucks increased 500% and imports of motor vehicle parts increased 150%.
• Overall employment in motor vehicles and parts lost nearly 8,000 jobs in the first Trump administration. And the significant geographic churning of domestic employment toward lower-wage, non-union jobs in Southern U.S. states contributed to the decline in quality of the remaining jobs in the sector.7
• Looking forward, state-supported Chinese electric vehicle (EV) producers are positioning to exploit loopholes Trump left in USMCA that enable them to penetrate North American motor vehicle supply chains at the same preferential tariff rates as North-American-based producers, without having to compete under reciprocal opening in their home market. By routing through Mexico, Chinese producers will be able to circumvent the 60% blanket tariff President Trump proposed.
• Trump appointees to the NLRB led unprecedented attacks on workers’ rights, overturning long-established precedents, and empowering employers over workers at every turn.8
• In 2023, then-candidate Trump voiced criticisms of striking auto workers and avoided their picket lines in favor of speaking to workers at a non-union factory.9
• Trump and Tesla, Inc. CEO Elon Musk, the world’s largest EV-maker and one of just a handful of e-truck makers, are vocally anti-union, which suggests a Musk-influenced vehicles policy will not prioritize job quality.10 Moreover, Musk has not been shy about advocating for policies that will benefit his company and harm his competitors, even though these policies would be net negative for the US vehicles manufacturing sector as a whole.

Our modeling results show that eliminating financial support and domestic production incentives would fail to meet the three criteria for a clean vehicle transition and result in the worst possible outcome for industry workers and their communities. Not only will current producers fail to seize opportunities to develop new clean vehicle business—making U.S. truck consumers increasingly dependent on foreign technology leadership—but they will also face increasing cost pressures and a declining market share for ICE vehicles at the same time, giving an opportunity for new and foreign clean vehicle manufacturers to leapfrog incumbent domestic producers.

The real way to achieve a just transition to manufacturing clean vehicles is to expand the domestic content and market share for medium- and heavy-duty vehicles produced in the United States, while leveraging substantial public investments to raise job quality across the industry. After surveying the landscape for jobs in the U.S. truck and bus manufacturing industries, the report presents and compares analyses of potential economic futures under varying transition policy scenarios. We conclude with an overview of the policies needed to achieve a just transition in U.S. truck manufacturing—and looming over all these will be the deadline for the United States and partners to reauthorize USMCA in 2026, and a potential opportunity to fix some of these problems. 

Summary findings

• U.S. truck and bus producers face intensifying competition from lower-wage countries, subsidized imports, and corporate offshoring. In 2023, the U.S. imported more than 14 times as many trucks and buses (342,000 units) as in 2007—11,100 units more than produced domestically, with nearly 90% of imports from Mexico.11
• Employers continue issuing credible threats to shutdown factories and relocate production in order to suppress wage demands at home, made possible by the rapidly deteriorating trade position under USMCA. Since 2020, major employers in truck supply chains—like Volvo Group’s Mack Trucks, Daimler Trucks, and Stellantis—have made threats to their workers, announced plans to move production offshore, or implemented relocation plans.12
• State-supported Chinese clean vehicle and component producers are positioning to exploit gaping loopholes left in USMCA motor vehicle content rules going forward. Overall, the Chinese foreign direct investment (FDI) foothold in Mexico grew more than 560% since 2016 and imports of core Chinese-made parts to Mexico, like chassis with engines and bodies and cabs, increased by 132 times and 670 times, respectively, since the start of the 2009 business cycle expansion. This loophole is not just open to Chinese producers. And while we have yet to see importation of complete, Chinese-made trucks or buses from Mexico, U.S. policymakers should anticipate such a probabilistic future scenario and take steps to offset the effects of bad trade policies and market-distorting Chinese-government subsidies.
• Eliminating support for clean energy vehicles would undermine domestic manufacturing industries. Revoking the IRA and related policies would kill support for manufacturing clean energy vehicles and components—stranding $145 billion in new investments and costing more than 35,000 job-years (a quantity requiring one person’s work over one year) in truck assembly and parts manufacturing of ICE and clean vehicles. In total, nearly half a million fewer clean energy trucks and buses would be produced domestically through 2032.13 This would also likely mean loss of market share for domestic content components in diesel gasoline-powered trucks and buses because legacy producers not benefitting from the clean vehicle transition will face deteriorating economies of scale in ICE vehicle production.
• For a just transition, clean energy trucks and buses must be built in the U.S. with good union jobs. Relative to current market expectations, building on current policies to better incentivize investments in domestic production and high-quality jobs could yield an additional 172,000 job-years, building at least 477,000 more clean energy trucks and buses at union wages in the United States through 2032.
• Most of these jobs (79%) would not require a college degree, and with union representation, these workers can earn middle-class wages and comprehensive benefits.

• Better wages for manufacturing workers mean better economic outcomes. Contrary to what many companies claim, it is possible to pay workers good, union wages and provide them benefits while transitioning production lines to clean trucks. We find that widespread unionization with policies to onshore truck and bus manufacturing would increase output and wages throughout the domestic supply chain by $85.9 billion and $28.8 billion, respectively. Building more trucks and buses with more workers is good for workers, good for the communities where these high-quality jobs are located, and good for the environment.

Why we wrote this

Medium- and heavy-duty vehicles are a backbone of economic life, transporting the goods, services, and people working in our economy.14 With 23 million vehicles on the road driving 430 billion miles annually, these trucks and buses serve as essential links in the chains that deliver the goods and services to people and businesses, propelling economic activity.15 Motor vehicle manufacturing employment more broadly is a critical driver of overall economic activity in the United States: Each job in the industry supports 10 additional jobs and three times the output throughout the rest of the economy.16 

But the prevalence of big trucks and buses throughout the economy also carries substantial environmental—and, as a result, economic and public health—consequences. In the United States, the transportation sector is the single largest source of greenhouse gas emissions, with trucks and buses accounting for about one-fourth of those emissions, despite being just 6% of the vehicles on the road.17 Beyond global climate effects, localized air pollution from the transportation sector comes with substantial economic costs that go beyond individual health outcomes—costs borne disproportionately by the 120 million people living in low-income communities and communities of color, often in marginalized proximity to concentrated sources of emissions.18 Such chronic and pervasive exposure to toxic emissions carries macroeconomic implications for human capital accumulation and long-term productivity growth.19

Tailpipe emissions from trucks and buses account for one-fourth of total transportation emissions, in turn one-fourth of U.S. emissions from all sources, and have grown 2.2% annually, on average, since 2000.20 And the consequences for our looming climate crisis are driving an unprecedented global transition to electrify transportation—the eventual replacement of fossil fuel-powered vehicles with no-emission vehicles powered by onboard rechargeable batteries or fuel cell systems that convert hydrogen gas to electricity.21 That’s why 36 countries, including the United States, have pledged to reach 100% clean truck and bus sales by 2040, along with subnational entities like California, New York City, and a wide range of manufacturers and suppliers, fleet owners and operators, utility and infrastructure providers, and private capital investors.22

Achieving this transition will require further development of a wide range of technologies. Innovations will be required for producing the different component parts necessary for electrified vehicles, as well as for the development and installation of information technologies and capital equipment needed to manufacture those components at scale. What’s more, success will require equally ambitious and complementary investments to upgrade and expand renewable energy supply chains on which clean vehicle operations will rely—generation, storage, transmission, and distribution to end users. The challenges of clean vehicle industry development are too complex for traditional policy silos and will require policymakers to take a coordinated approach to industrial policy in order to achieve a just transition.

The stakes of failing to achieve a just transition are high given rising competition to control markets for medium- and heavy-duty vehicle manufacturing. Already, Trump’s USMCA continues NAFTA’s drain of jobs and employers’ ability to suppress worker demands with threats of relocation. But the international competitive environment is shifting and poised to disrupt U.S. markets with vehicles produced in USMCA countries but supplied by a rapidly growing overseas network of Chinese parts producers exporting market-distorting subsidized products to the United States. Without additional policy actions, the U.S. risks experiencing another “China shock”-level event, which decimated manufacturing communities across the country, focused on the broader motor vehicle manufacturing industry.23 This will mean loss of jobs and downward pressure on wages and standards in the jobs that remain, leaving U.S. labor markets and transportation supply chains exposed to risks of international disruption.

Achieving a just transition entails a significant public sector role to manage the transition: creating demand for new investments; retooling legacy internal combustion engine production facilities and training the workforce to produce the clean vehicle goods of the future; striking the right balance in foreign trade; and providing financial bridges to small and medium employers who will face less favorable access to capital markets and steeper challenges in navigating the transition. Failing to pursue a robust and comprehensive clean vehicle agenda is likely to leave workers and the industry’s small and medium enterprises in the lurch.

Sharpening international competition for and offshoring of truck and bus manufacturing

Natural barriers to trade due to the size and weight of MHDVs, as well as the importance of proximity to consumers demanding high degrees of customization, have long insulated U.S. truck and bus manufacturing industries from more intense trade competition—although parts producers in the supply chain have certainly not been immune to pressures from outsourcing and offshoring, with subsidized foreign steel and aluminum content taking a heavy toll. But now international competition is sharpening as the world races toward a transition to clean vehicles, and Chinese producers have begun establishing manufacturing footprints for homegrown Chinese firms and hallmark brands around the world.24 Supported by wide-ranging government subsidies and lax labor, environmental, and consumer protection regulations, a growing new presence of Chinese state-supported motor vehicle manufacturing on America’s doorstep portends a critical challenge to U.S. producers.

President Trump made trade competition a signature economic policy of his first term, although outcomes from his agenda largely failed to address these challenges.25 While Trump created an opportunity to renegotiate NAFTA, an agreement that had long plagued U.S. motor vehicle and parts workers, its replacement failed to rebalance trade or to address NAFTA’s fatal flaws that empower multinational producers to threaten and actually relocate work to lower-wage and more readily exploitable places like Mexico. Rules designed to promote North American production set too low a threshold for determining what counts as North American content to qualify for duty-free treatment in North American trade were not designed to effectively incentivize use of higher-wage local content in manufacturing vehicles.26

Tariffs Trump imposed in his first term aimed to tackle the challenge of state-supported exports of Chinese technology goods, including many categories of motor vehicle parts. Separate global tariffs on steel and aluminum products bound on Chinese exporters, who have upended global markets with strong state support.27 But the main effect was not to deter imports from Chinese-oriented motor vehicle supply-chains, but to divert their production to third countries subject to more favorable tariff treatment by the United States. A surge of outbound Chinese FDI and exports of manufacturing equipment followed, accompanied by surging U.S. imports of motor vehicle parts from countries where Chinese producers expanded their offshore export platforms, including Mexico, Thailand, India, Indonesia, Malaysia, the Philippines, and Vietnam.28 In Mexico, nearly one-fourth of Chinese FDI in late 2023 flowed to the auto industry.29

Figure A illustrates this rising import competition in trucks and buses in recent years, most notably the sharp growth in imports from Mexico, particularly after USMCA.30 In 2007, prior to the Great Financial Crisis and the 2008 U.S. auto industry crisis, the U.S. imported a mere 24,000 MHDVs (less than 10% of U.S. production) with two-thirds of these imports coming from Canada.31 Following the economic recovery after 2009, increasing truck and bus production in Mexico largely displaced Canadian production to serve an expanding share of the U.S. market. Amid this race to the bottom, truck and bus imports from Mexico grew to nearly 98,000 units by 2019—92% of total truck and bus imports—with imports from Canada amounting to less than 6% of total imports, and those from the rest of the world amounting to less than 3%. In total, imports grew to represent 31% of U.S. MHDV production.

By 2023, the United States imported more than 342,000 trucks and buses—88% from Mexico, or 11,100 more units than were produced domestically. This dramatic shift largely reflects growing outsourcing and migration of traditional U.S. producers to Mexico. This dynamic may be poised to change in coming years as a result of the increasing penetration of Chinese manufacturing foreign direct investment in Mexico seeking sidestep U.S. trade enforcement measures.32 With an early start and heavy subsidization under the 2013 “Made in China 2025” policy, China has become the world’s largest producer of and market for clean energy vehicles, and established supply chain dominance in critical clean vehicle components, particularly in the minerals, anodes, cathodes, and cells that go into storage batteries.33

Figure A

Facing U.S. tariffs on a wide range of manufactured and technology goods and steel and aluminum products, as well as broader trade policy efforts to uphold U.S. steel and aluminum producers, Chinese firms began shifting production chains toward countries with more favorable tariff treatment. From 2018 to 2022, Chinese firms increased their direct investments in Mexico by 126%, and their exports of manufacturing equipment to Mexico increased 134% over their pre-tariff level.34 Chinese outbound investment and export of manufacturing machinery show a similar pattern with countries that have shown surging motor vehicle parts exports to the U.S. in the years following 2018 tariffs: Thailand, India, Vietnam, Malaysia, and Indonesia, among others.35 This is less an example of trade diversion (changing trade partners to the next lowest-cost country) than of production diversion—rerouting production in Chinese supply chains through third countries to gain preferential access to U.S. markets. And the most preferred access comes through USMCA partners Mexico and Canada.

A misguided USMCA panel ruling in December 2022 already undercut stronger “rules of origin”—i.e., measures to ensure that imports receiving the best access to North American markets are made with significant North American-originating (“regional value”) content, by workers earning decent wages—in the renegotiated agreement. This ruling enables substantial non-North American content to enter North American motor vehicle supply chains in vehicles that qualify for duty-free entry to U.S. markets. The more complicated an intermediate part is (i.e., the more it incorporates lower-tier components), the more foreign content can masquerade as being “Made in North America.”

USMCA was negotiated prior to policy and industry commitments to the clean vehicle transition, leaving key components and technologies inadequately addressed in existing USMCA rules of origin. The leakage to non-USMCA content undercuts U.S. and North American workers by pitting them against foreign producers operating without the same commitments to worker, environmental, and consumer safety standards—and without similarly extending reciprocal market access to U.S.-based producers. What’s more, this subterranean content can qualify for clean vehicle tax credits subsidized by U.S. taxpayers under the IRA.

Chinese clean energy vehicle and parts manufacturers are poised to exploit this foothold into USMCA markets. Already, the United States is facing surging motor vehicle parts imports from countries where Chinese producers are expanding investments in manufacturing, but complete Chinese-branded vehicles produced in Mexico are not far behind with potential for severe disruption of established producers.36 And the United States is not the only country facing risks from surging, subsidized Chinese vehicle and part imports. Following a nearly year-long investigation into Chinese electric vehicle subsidies, the European Union levied countervailing tariffs of up to 45.3% on imported Chinese vehicles.37

The case of Chinese company BYD is instructive. From an upstart mobile phone battery company that manufactured its first car in 2005, BYD is now the world’s largest EV manufacturer and the world’s second largest EV battery producer.38 BYD is already a manufacturer of battery electric vehicle (BEV) school buses in Canada and school, coach, and transit buses in the United States. These projects began with promising community engagement and $39 million in taxpayer funds but devolved into recriminations of broken promises over the number and quality of jobs created and community benefits delivered.39 A range of BYD battery electric Class 6 and Class 8 trucks are already available in the U.S. market—more models than any other clean energy vehicle manufacturer is offering.40

BYD’s current dominance in the market for light passenger vehicles should serve as a harbinger of the potential for the company—among others benefitting from direct and indirect Chinese government support—to undercut U.S. and global markets for trucks and buses as well. Analysis released by industry benchmarking firm A2Mac1 shows that BYD markets essentially the same battery electric car (the Dolphin) in both the Chinese and European Union markets, but what retails for around $14,000–$15,000 in China is priced at $33,000–$35,000 in Europe—in line with the lowest priced BEVs in the market.41 Even after accounting for slight modifications to the vehicle to comply with higher European safety standards, taxes, and transportation costs, A2Mac1’s piece-by-piece teardown of the vehicles in the two markets finds that BYD is earning roughly $7,400 in profit on each unit sold in the EU.

These super profits owe to BYD’s unparalleled low costs of production, only made possible by a complex set of complementary Chinese government policies. To be certain, BYD has produced a number of cutting-edge product and process innovations that have made the company a technological leader, but they have done so with the benefit of robust and comprehensive industrial policies providing favorable access to credit and land; tax and regulatory forbearance; investments in critical mineral development and refining; investments in workforce development; demand-side policies providing consumer incentives and charging infrastructure; and suppression of worker rights, health, and safety concerns.

At present, BYD is content to reap these profits rather than upend market structures with price wars that are now squeezing other electric vehicle manufacturers.42 Insulated from the same kind of financial market pressures to return short-term profits to investors faced by peer companies in the United States, BYD can instead expand on their competitive lead by returning those earnings to investment in developing new technologies and markets for their products.43 But the mere realization of such super profits signals to competitors BYD’s ability to wage a decisive price war, which is certain to deter future investments by others or potential new entrants in the market for clean energy vehicles without a change to the market dynamic.

The situation for clean trucks and buses will be no different. Without additional policy actions to ensure development of viable domestic clean vehicle manufacturing, increasing permeation of BYD and other Chinese motor vehicle assembly and parts firms in Mexican manufacturing with potential preferential access to U.S. markets through USMCA is set to sharply disrupt U.S. truck and bus (and light-duty vehicle) manufacturing.

Assessing the jobs and economic impact of battery electric (and fuel cell electric) trucks and buses

Our modeling analysis focuses on how U.S. industry employment and output in truck and bus manufacturing and supply chain industries would be impacted by strengthening or curtailing policies intended to promote onshoring of domestic clean vehicle manufacturing, high-quality union jobs, and financial support for infant clean vehicle industries. We use the IMPLAN input-output model to assess the impacts of a shift from manufacturing diesel trucks and buses to ones with battery electric or fuel cell electric powertrains and a range of policy scenarios over the medium-term outlook from 2024–2032. Input-output models divide the economy into constituent industries and trace the complex interdependencies between them—546 discrete industries in IMPLAN’s case.44

In this report, we limit our consideration to impacts on the truck and bus assembly industry and the business-to-business purchases of inputs required for manufacturing of final vehicles, and so on down the supply chain. This excludes so-called “induced effects” on the macroeconomy created when workers directly engaged in truck and bus supply chains spend their incomes, which can—statistically speaking—suffer from aggregation bias in such analysis.

We take S&P Global Mobility’s Medium- and Heavy-Commercial Vehicle Forecast as the baseline scenario for our analysis against which to measure impacts of potential policy changes.45 S&P Global Mobility surveys market participants and producers; their database covers more than 95% of global MHDV production at the plant and vehicle model level for medium- and heavy-duty trucks and buses (Class 4–8 vehicles), a representation of which is pictured in Table 1.46 In total, S&P Global projects U.S. production of nearly 3.9 million MHDVs from 2024–2032, including nearly 600,000 battery electric vehicles and 115,000 full cell electric vehicles (FCEVs). Under current expectations and market and policy conditions, S&P Global projects that by 2032, 28% of U.S. heavy truck production will be clean vehicles and 42% of medium-duty trucks and buses will be clean energy-powered.47

Table 1

BEVs and FCEVs are too new to receive unique treatment in the IMPLAN model’s array of industries. Therefore, first we must estimate the requisite component inputs for these new manufacturing industries. This goes well beyond just the different powertrains propelling the trucks and buses forward—batteries, motors, and fuel cell systems. E-drive systems in both battery electric vehicles and full cell electric vehicles necessitate redesigning chassis to accommodate battery and electrical systems. Essential functions powered by the burn of a diesel engine like power-steering and power-braking, cabin and cargo HVAC, and thermal management all need to be adapted to high-voltage electrical systems. Upgraded tires are needed to handle additional torque at the wheel from e-drive and regenerative braking. All of this requires using substantially more semiconductors and related content than are found in a clean energy vehicle’s diesel counterpart.

Technological advances in recent years, in tandem with increased investments to meet growing consumer demand for clean vehicles, will bring light-duty BEVs to cost parity with diesel vehicles—even before accounting for current IRA consumer tax incentives—and medium- and heavy-duty clean energy vehicles are not far behind.48 Industry executives regularly claim that BEVs will require 30–40% less labor content than diesel internal combustion engine vehicles.49 Auto executives certainly should have inside information on the production engineering process, but they also have incentives to mislead shareholders (about the potential costs of the transition) and workers (in order to suppress wage demands).

However, independent engineering data do not bear out this reduction in labor content required for clean vehicle production, suggesting that EVs should be expected to embody more labor content than ICE vehicles.50 As a result, it is reasonable and conservative to treat the labor content of ICE and BEV vehicles to be roughly equivalent. Still, such technical engineering analysis leaves open the questions of where and under what conditions those alternative powertrain components will be developed and produced.

Beginning with IMPLAN’s model for ICE heavy-duty vehicle manufacturing, we adjust the contributions of various motor vehicle input industries to substitute costs for components that will replace existing diesel parts. The International Council on Clean Transportation and Ricardo, Plc., a private motor vehicle industry consulting group, provide a teardown analysis identifying cost breakdowns for clean energy components relative to other costs of a complete vehicle, as well as future cost trajectories, as technologies and manufacturing economies of scale improve in the near term.51 Replacing—or, in some cases, supplementing—industry inputs to diesel truck and bus manufacturing with content for low- and no-emission vehicles and scaling overall costs to 100% allow us to create new clean energy vehicle industries that can be modeled within IMPLAN. Thus, we can jointly model the impacts of projected U.S. trucks and buses production for nine discrete groups of vehicles: medium- and heavy-duty trucks and buses produced with diesel, battery electric, and fuel cell electric powertrains.

The baseline S&P Global forecast embodies the current policy environment under Biden-Harris administration policies, as well as market expectations for truck and bus, consumer preferences for drivetrains, and the landscape of international competition within motor vehicle supply chains. We then vary these assumptions in a variety of scenarios to test the impacts of different possible directions for U.S. clean energy vehicle manufacturing policy on employment and output:52

1. 50% clean truck and bus adoption: The U.S. has joined a group of 36 nations pledging 100% of new sales will be clean trucks and buses by 2040.53 Given the rapidly converging cost differences and expected lower total cost of operation for clean energy vehicles, as well as private sector commitments to decarbonize and reduce operational costs, we consider an intermediate scenario where adoption of electrified trucks and buses may outpace S&P Global projections.54 Here, we assume that U.S. output of clean trucks and buses reaches 50% of the total by 2032—with increased production primarily coming from more BEVs—as opposed to the 28% for heavy-duty trucks and 42% for medium-duty trucks and buses currently predicted by S&P.
2. Baseline + increased domestic market share: Unlike the IRA’s Section 30D light-duty clean vehicle tax credits, clean commercial vehicles qualifying for up to $40,000 each under Section 45W do not come with the same requirements for North American assembly or for critical mineral and battery components. To test the potential impact of policies incentivizing increased domestic production of complete trucks and buses and parts, we assume a 10% increase in U.S. production with a doubling of U.S.-originating content in storage battery production.
3. 50% clean trucks and buses + increased domestic market share: This scenario applies the assumption of increased domestic market share in the second scenario with the assumption of more rapid end-user clean vehicle adoption.
4. Scenario 3 + widespread unionization. As discussed above, policies supporting the development of clean energy truck and bus manufacturing industries eschewed requirements that public resources be used to support good jobs. Although political compromise necessary to pass legislation stripped motor vehicle manufacturing workers of labor protections extended to construction work, there are a variety of policy options available that can ensure public resources are being used to support good jobs and not just corporate profits. To test this scenario, we adjust total labor income in the truck and bus manufacturing industry to a union-equivalent rate, based on the current union-wage premium and industry unionization rate, while holding employment constant.
5. Trump’s likely approach: retreat from the clean vehicle transition. Despite the pressures from ballooning greenhouse gases and other toxic emissions from trucks and buses and the rapid expansion of private investment into U.S. clean vehicle manufacturing, not a single Republican official supported IRA legislation. Now, many have pledged to undo public policies supporting this green transition—President Trump, Sen. John Barasso, Sen. Shelly Moore Capito, Rep. Cathy McMorris Rodgers—and at least nine Republican-sponsored bills would repeal or rescind IRA programs.55 In this scenario, we assume the loss of support for investment in domestic manufacturing cuts the domestic content shares of key clean vehicle components by as much as one-half, while loss of demand-side tax credits for MHDV purchases and declining production efficiencies at lower-scale operations cut U.S. clean vehicle production to one-fourth of the S&P Global baseline. Disruption and uncertainty from the policy reversal make consumers less likely to choose low- and no-emission powertrains over diesel trucks and buses, and those opting for clean vehicles are more likely to be supplied by foreign manufacturers or by domestic manufacturers using significantly higher foreign parts.

Results

Figures B–D present visualizations of our topline modeling results for employment, labor income, and economic output impacts, respectively, relative to the S&P Global baseline scenario. When interpreting these results as a whole, it is important to keep in mind that truck manufacturing is an unusually high capital-intensive activity, where a relatively small number of workers can produce large value of output. In Scenario 1, where we assume faster than expected adoption of clean trucks and buses (50% of the market by 2032), employment in truck and bus manufacturing would increase by more than 31,000 job-years while employment in truck and bus supply chain industries would increase by more than 93,000 job-years. Combined, a more rapid expansion of clean truck and bus adoption in the U.S. market would support nearly 125,000 more job-years of work in motor vehicle and parts manufacturing than the status quo. As a group, these workers will earn $11.2 billion over this time. Reaching 50% clean truck and bus adoption by 2032 will mean an additional $61 billion in economic activity in U.S. motor vehicle and parts industries.

Even if the path of clean energy vehicle adoption remains the same through 2032, policies that work to increase the onshore manufacturing and domestic content of U.S. trucks and buses and parts (Scenario 2)—resulting in more domestic manufacturing activity for the same quantity of vehicles—will also improve the situation of workers and businesses in the industry. Increasing market share for U.S. medium- and heavy-duty motor vehicle and parts manufacturing is a boon for workers in the industry, supporting a total of more than 148,000 additional job-years—more than 33,000 in vehicle manufacturing and 115,000 in supply chains, earning an additional $13.3 billion. In total, output in the industry is expected to increase $72 billion by 2032, relative to S&P Global’s baseline scenario.

With an increased clean vehicle share and increased domestic market share separately improving employment and output prospects for truck and bus manufacturing and parts, it should be no surprise that combining the effects (Scenario 3) yields even more positive results. In this scenario, higher demand for clean trucks and buses combined with greater U.S. production capacity translates into more work and more GDP incentivized by green transition policies, supporting more than 171,000 additional job-years, $15 billion in labor income, and $82 billion in industry output.

Ideally, strong labor protection policies would work in concert with supply- and demand-side policies to support good jobs alongside emerging clean vehicle manufacturing industries as they develop. Thus, we model a scenario (4) where widespread unionization raises wages to union levels, strong U.S. content requirements expand domestic market share by 10%, and consumer preferences bring clean trucks and buses to a 50% market share. Here, we assume the same number of workers is employed assembling these vehicles, but that they are paid a union wage. With labor inputs representing only a marginal share of the total cost of a vehicle, it is expected that firms adjust through a combination of lower corporate profits and executive compensation. Given historic profitability and CEO pay, companies have ample space to absorb these costs.56 In certain market dynamics, producers may be able to pass some of this additional cost onto consumers, but the price difference would be imperceptible—less than the cost of purchasing floor mats with a new vehicle.

In this maximal policy scenario, total employment supported in the industry would increase by 172,000 job-years, paying $19.1 billion in labor income, while output would expand by $85.9 billion over the baseline forecast scenario. These results suggest that policies supporting increased domestic manufacturing and unionization yield 28% more labor income for workers over the status quo. What’s more, rather than adversely impacting business with increased labor costs, unionization increases industry output by 4% relative to merely increasing clean energy vehicle quotas and domestic content (Scenario 3).

By now, we can see a pattern emerging: The stronger and more comprehensive the policy support for a clean truck and bus manufacturing, the greater the overall job and economic benefits we should expect for the industry. However, many conservative politicians—including President Trump—are pledging to undo signature legislation supporting a green transition in motor vehicle manufacturing (Scenario 5). Our analysis shows that such a move creates a lose-lose-lose outcome. A policy retreat from greening U.S. truck and bus manufacturing would cull more than 35,000 job-years from the industry (7,200 in vehicles and 28,000 in parts); drive the loss of $3.3 billion in labor income; and shrink industry output by $15.8 billion relative to the baseline scenario, as the United States misses out on newly resurgent motor vehicle manufacturing industries and becomes reliant on foreign technology and manufacturing imports.

Figure E further shows the damage that such a policy move would wreak. Relative to the baseline scenario, 477,000 fewer trucks and buses would be made in America, compared with an additional 112,000 trucks in Scenario 4. The intuition is clear: producing more vehicles with higher shares of U.S.-made content requires more workers (or work hours) who are paid decent wages. The policy retrenchment from clean vehicle transition proposed by President Trump not only moves in the opposite direction, but it runs counter to global trends. Because the rest of the world will be transitioning to clean vehicles, this could effectively shut U.S. producers out of future truck and bus export markets.

Even these figures likely significantly understate the potential economic costs of a clean vehicle policy retrenchment. Job losses predicted by the IMPLAN model only capture the mechanical production relationships between truck and bus manufacturing and their demands on motor vehicle supply chain industries. We should anticipate in practice, given real-world complexities, that economic uncertainty and chaos in the sector following such a policy whiplash will impose more severe job and economic costs.57 In particular, small- and medium-sized suppliers with less favorable access to credit markets than multinational corporations or subsidized foreign producers will find it harder to adapt to shifting targets and could face elimination from the market.

Our results show that, whether battery- or hydrogen fuel cell-driven, electrifying truck and bus manufacturing with high policy standards is a clear winner for workers and the industry overall. However, it is important to highlight that these results do not suggest that all firms and workers will automatically be winners under the transition to electrified trucks and buses. Workers and plants producing legacy ICE vehicles and parts will need retraining and retrofitting to take advantage of new opportunities; smaller businesses with less favorable access to capital than multinational manufacturers will have more difficulty adapting to these changes. Policies must pay careful attention to both ensure that dislocations from churning are managed to avoid creating political resistance to transition policies or to erode the overall benefits promised by the transition.

Figure B

Figure C

Figure D

Figure E

Policy recommendations and conclusion

Federal incentives to build clean vehicles and their components in the United States and to buy domestically manufactured vehicles have spurred a manufacturing renaissance in this country.58 The future of U.S. truck and bus manufacturing industries will be determined by whether policymakers take steps to ensure a just transition toward manufacturing clean vehicles. President Trump’s move to scuttle financial incentives for U.S. clean vehicle manufacturing will likely accelerate the decline in U.S. truck and bus manufacturing employment and job quality, as well as the communities these support.

This outcome is not inevitable, but could result from a series of bad policy choices that would empower companies over workers. Our modeling shows that another path is possible where clean trucks and buses are made with domestically manufactured components (particularly batteries) and when workers are paid union wages, the economic benefits of a clean truck and bus transition can more than offset losses in sunset ICE manufacturing industries. Doing so will require that policymakers build on current policies and other legislation to tackle problems created by past trade policy mistakes and offer policy support to develop the market for clean vehicles from the supply and demand sides.

For the transition to succeed, broadly, the policy approach must:

1. Maintain a strong public commitment to the low- and no-emissions vehicle transition, including supply-side and demand-side measures to overcome endemic market failures in the development and deployment of new clean vehicle technologies.
2. Increase the domestic market share and domestic content share for clean vehicle components in made-in-America trucks and buses by tackling the problems of bad trade policies and strongly tying financial incentives to domestic content requirements.
3. Ensure that newly created jobs are good jobs with program requirements for companies receiving financial incentives to make them good jobs, penalties and clawbacks for companies that fail to meet their commitments, and prohibitions from participating in programs for companies that can’t show “clean hands” with the NLRB.

Domestic manufacturing requirements and incentives ensure that taxpayer support for the industry ends up supporting good jobs and investment to build the clean trucks of the future and their key components at home, rather than just contributing to corporate profits. Labor protections for manufacturing workers ensure that the permanent jobs are desirable, high-quality, and community-sustaining jobs, where workers have the free and fair choice to join a union.

From this perspective, strong supply-side programs are those that require applicant manufacturers to build clean trucks and batteries in the U.S. and source components from other domestic manufacturers. They require applicants to meaningfully engage with organized labor and together build frameworks to negotiate community benefit and workforce agreements, which pave the path to unionization. Strong demand-side programs drive fleet owners to purchase vehicles only from manufacturers that assemble their vehicles in the United States, and source U.S.-made batteries and other components. They require or incentivize the purchase of vehicles made by union workers, or in facilities where workers have the free and fair choice to join a union.

Specifically, policymakers designing incentives to support clean truck manufacturing and deployment should consider adopting the following policies:

Trade policy recommendations

1. Raise the MFN tariff rate on trucks and buses to incentivize companies to invest and operate in compliance with the North American Rules of Origin requirements—rather than simply choosing to pay the current tariff rate—while tightening these rules to cover critical clean vehicle components and to ensure content is truly made in North America.
2. Leverage the USMCA July 1, 2026 sunset to negotiate to raise standards for wages and working conditions across all three countries by tightening Rules of Origin for what qualifies as “Made in North America,” improving USMCA’s labor chapter, strengthening enforcement of the Labor Value Content calculations, more aggressive implementation of USMCA’s Rapid Response Mechanism to expand labor rights in the region, and establishing meaningful wage standards for manufacturing workers.
3. Restrict any goods subject to China Section 301 and Section 232 tariffs from gaining preferential access to U.S. markets under trade agreements or preference programs, including the USMCA and the Generalized System of Preferences (GSP) granting favorable U.S. market access to select low-income and developing economy countries.
4. Restrict any goods produced by an entity based in, supported by, or owned by a nonmarket economy from gaining preferential access under trade agreements or preference programs, including USMCA and GSP.
5. Proceed quickly on the Department of Commerce, Bureau of Industry and Security’s “connected vehicles” notice of proposed rulemaking (2024) to exclude vehicles and sensitive technology and components from countries of concern from operating in the United States.59

Supply-side policy recommendations

1. Utilize program requirements to ensure that applicant manufacturers have made enforceable commitments to card check neutrality, indicating the company’s pledge to voluntarily recognize and bargain a contract with the union once the majority of workers indicate they would like to be represented by that union. Card check neutrality commitments secure workers’ right to organize without illegal intimidation from employers.60
2. Require applicant manufacturers to submit detailed Community Benefits Plans modeled after the Department of Energy’s Battery Manufacturing & Recycling and Battery Materials Processing Grants, wherein employers are asked to submit letters of support from labor unions and required to build plans that advance community and labor engagement, as well as job quality and worker continuity.61
3. Predicate the awarding of government support for applicant manufacturers on a “clean” record with the National Labor Relations Board, which helps to indicate an employer’s observance of, and respect for, existing labor law.
4. Utilize clawback provisions with penalties to hold applicant manufacturers to their labor commitments on an ongoing basis, and beyond authoring the initial Community Benefits Plan.62

Demand-side policy recommendations

1. Require domestic assembly and domestic content requirements to access clean truck deployment incentives, including grants and tax credits.The current policy for commercial clean vehicle tax credits (Section 45W) available to truck and bus consumers requires neither. For all consumer incentives, ensure that only vehicles undergoing final assembly in the U.S. and with domestically manufactured battery cells (including cell components such as anodes, cathodes, and separators) are eligible.
2. Add additional “bonus” incentives for the purchase of vehicle models assembled in facilities where manufacturing workers are protected by a collective bargaining agreement, as certified by a labor union. Add further incentives for the purchase of vehicle models using battery cells made in union manufacturing facilities, as certified by a labor union.
3. Apply Build America, Buy America to school buses as part of the nation’s critical rolling stock—just like public transit buses and mobile port equipment are now.
4. Implement Build America domestic content rules in a manner that distinguishes batteries and non-battery components. Batteries can comprise more than half of the cost of a clean energy vehicle; as written, current content rules are likely to push other non-battery components (currently or with potential for domestic manufacturing) offshore.
5. Expand Transit Infrastructure Vehicle Security Act restrictions to cover all federal assistance applicable to trucks and buses, currently only applied to Federal Transit Administration and Federal Aviation Administration programs.

Smart industrial policy uses a host of tools—like grants, loans, and tax credits—to proactively shape a nascent industry to maximize particular benefits or realize specific outcomes. The recommendations offered above may, where feasible, be applied to existing programs in future rounds of funding or help to guide the creation of new supply- and demand-side programs at all levels of government.

However, it is important to note that manufacturers are free to contribute to a strong, domestic, and union-dense clean truck supply chain without government intervention or coercion. They can choose to be high-road companies, competing on the basis of the quality of their products—rather than on the low costs of their production processes, materials, and labor. That they have historically chosen not to do so is the reason why smart industrial policy is so essential.

Acknowledgements

The authors would like to thank the following people for valuable input on earlier drafts: Candace Archer, Jim Barrett, Josh Bivens, Katherine deCourcy, Anna Fendley, Ted Fertik, Katherine Garcia, Alice Henderson, Basma Hussein, Eddie Iny, Roxanne Johnson, Jori Kandra, Jennifer Kelly, Alison Kirsch, Stevie Marvin, Terin Mayer, Ray Minjares, Eric Ribbentrop, Ellen Robo, Kevin Rudiger, Megan Sarlin, Luke Tonachel, Yihao Xie, and Peter Zalzal.

Appendix

Appendix Figure A

Appendix Figure B

Appendix Figure C

Notes

1. Frank Levy and Peter Temin, “Inequality and Institutions in 20th Century America,” National Bureau of Economic Research Working Paper no. 13106, May 2007.
Henry S. Farber, Daniel Herbst, Ilyana Kuziemko, and Suresh Naidu, “Unions and Inequality over the Twentieth Century: New Evidence from Survey Data,” Quarterly Journal of Economics 136, no. 3 (August): 1325–1385.
Joel Cutcher-Gershenfeld, Dan Brooks, and Martin Mulloy, The Decline and Resurgence of the U.S. Auto Industry, Economic Policy Institute, May 2015.
Lawrence Mishel and Josh Bivens, Identifying the Policy Levers Generating Wage Suppression and Wage Inequality, Economic Policy Institute, May 2021.
Chandra Childers, Rooted in Racism and Economic Exploitation, Economic Policy Institute, October 2023.
Adam S. Hersh, “UAW-Automakers Negotiations Pit Falling Wages Against Skyrocketing CEO Pay,” Working Economics Blog (Economic Policy Institute), September 12, 2023.
U.S. Bureau of Labor Statistics, All Employees, Motor Vehicles and Parts [CES3133600101], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CES3133600101, last updated November 1, 2024.

2. The heavy-duty vehicles comprise a unique segment of the industry with its unique challenges, though also sharing some commonalities with the transition in light-duty vehicle manufacturing; for some data, official statistics do not disaggregate between light-duty and heavy-duty industry segments. Where available, we present industry-specific data; elsewhere we rely on higher industry aggregation for motor vehicles and parts manufacturing.

3. The White House, President Biden Announces up to $6.1 Billion Preliminary Agreement with Micron under the CHIPS and Science Act (fact sheet), April 25, 2024.

4. Department of Labor, “Protections for Workers in Construction Under the Bipartisan Infrastructure Law” (web page), accessed May 2024.
Internal Revenue Service, “IRA Prevailing Wage Requirements” (web page), accessed May 2024.
CHIPS for America, Building a Skilled and Diverse Workforce (fact sheet), published February 28, 2023.

5. The White House, Unleashing American Energy (executive order), January 20, 2025.

6. The Economist, “Why Chinese Companies Are Flocking to Mexico,” November 23, 2023.
Meritt Enright, “How China Became the Leading Car Supplier to Mexico and What It Means for the U.S.,” CNBC, August 24, 2024.
Mexico News Daily, “BYD Weighs 3 States for Electric Vehicle Plant,” August 26, 2024.
Elizabeth Machuca, “China’s BYD Plans Expansion Into Mexico, Rules Out U.S.,” Wards Auto, May 24, 2024.
Reuters, “MG Motor to Build Manufacturing Plant, R&D Center in Mexico,” August 8, 2024.
Noi Mahoney, “China-Based Automaker to Invest $3B in Mexico EV Plant,” Freight Waves, April 3, 2023.

7. U.S. Bureau of Labor Statistics, All Employees, Motor Vehicles and Parts [CES3133600101], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CES3133600101, last updated November 1, 2024.
Chandra Childers, Southern Economic Policies Undermine Job Quality for Auto Workers, Economic Policy Institute, September 4, 2024.

8. Celine McNicholas, Margaret Poydock, and Lynn Rhinehart, Unprecedented: The Trump NLRB’s Attack on Workers’ Rights, Economic Policy Institute, October 16, 2019.

9. Jill Colvin and Tom Krisher, “Trump Goes to Michigan to Rail Against Biden’s Electric Vehicle Push While GOP Rivals Debate,” Associated Press, September 28, 2023.

10. Grant Schwab, “UAW Claims Illegal Labor Threats in X Talk Between Musk and Trump,” The Detroit News, August 13, 2024.

11. Board of Governors of the Federal Reserve System (US), Motor Vehicle Assemblies: Heavy and Medium Truck Assemblies [MVAHMTRCKS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MVAHMTRCKS, last updated November 15, 2024.

12. AB Volvo, “Volvo Group to Increase North American Heavy Truck Production Capacity,” April 11, 2023.
Rick Holmes, “’Slap in the face’: Union criticizes company’s decision to build some Mack trucks in Mexico,” WFMZ-TV News, April 11, 2024.
Geert De Lombaerde, “Daimler Truck signals production ‘flexibility’ if Trump tariffs require it,” Fleet Owner, November 8, 2024.
Michael Mayland, “Automaker Stellantis has discussed moving pickup truck production from the U.S. to Mexico, union leader says,” CNBC, August 20, 2023.

13. BlueGreen Alliance Foundation, “EV Jobs Hub” (web page), last updated November 2024.

14. Medium- and heavy-duty vehicles encompass Class 4–8 trucks and buses—but not light-duty pick-up trucks like the Ford F-150, Chevrolet Silverado, or Dodge Ram—as well as school, transit, and coach buses; they do not include agricultural machinery or motor homes. Generally, these vehicles have a gross vehicle weight rating (GVWR) above 14,000 pounds and encompass most, but not all, of the list of “Medium- and Heavy-Duty Truck HTS 10-Digit Import Codes,” identified by the U.S. International Trade Administration (2023).

15. Dana Lowell and Jane Culkin, Medium- & Heavy-Duty Vehicles: Market Structure, Environmental Impact, and EV Readiness, Environmental Resources Management, July 2021.

16. Historically, motor vehicle jobs and output multipliers were even higher before so much of the supply chain moved offshore. Industries including wholesale and retail distribution of motor vehicles and parts and maintenance services comprise additional vast industries with broad economic impacts of their own.
IMPLAN (2024). IMPLAN Regions Multiplier Summary.
Josh Bivens, Updated Employment Multipliers for the U.S. Economy, Economic Policy Institute, January 2019.

17. Environmental Protection Agency, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2022, April 2024.
American Lung Association, Delivering Clean Air: Health Benefits of Zero-Emission Trucks and Electricity, October 2022.

18. American Lung Association, State of the Air, April 2023.

19. MHDVs are a major source of nitrogen oxide and particulate matter emissions—smog-forming pollutants that are strongly associated with a wide range of poor health and individual development outcomes, including adverse childhood cognitive and health development; increased incidence of chronic cardiovascular disease; and cancer. And these costs tend to be disproportionately borne by historically disadvantaged groups, often living in marginalized proximity to concentrated sources of emissions. Roughly 72 million people in disproportionately low-income communities and communities of color live in “fenceline” communities near warehouses, ports, railyards, airports, and major freight routes and highway corridors that experience heavy MHDV traffic. Particularly in the case of MHDVs, the American Lung Association (ALA) estimates that a full transition to zero-emission MHDVs by 2050 in just the U.S. counties with the highest levels of MHDV traffic would yield up to $735 billion in public health benefits. More specifically, ALA estimates that a full transition to zero-emission MHDVs by 2050 could avoid more than 8,500 lost workdays, 1.75 million asthma attacks, and 66,800 premature deaths. When including the impact of electrifying light-duty vehicles as well, these numbers increase to 13.4 million lost workdays, 2.78 million asthma attacks, and 110,000 premature deaths.
American Lung Association, Delivering Clean Air: Health Benefits of Zero-Emission Trucks and Electricity, October 2022.
Environmental Protection Agency, “Final Standards to Reduce Greenhouse Gas Emissions from Heavy-Duty Vehicles for Model Year 2027 and Beyond” (regulatory announcement), March 2024.
American Lung Association, Zeroing in on Healthy Air, March 2022.

20. International Energy Agency 50, “Trucks and Buses” (web page), accessed May 2024. 

21. A similar transition is underway in passenger vehicles and light trucks, with much overlap of producers in light-duty and medium- and heavy-duty motor vehicle supply chains.
International Energy Agency 50, “Trucks and Buses” (web page), accessed May 2024.

22. Global Commercial Vehicle, “Global Memorandum of Understanding on Zero-Emission Medium- and Heavy-Duty Vehicles” (web page), accessed May 2024.

23. EPI analysis of the Current Population Survey Basic monthly microdata, EPI Current Population Survey Extracts, Version 1.0.52 (2024), https://microdata.epi.org.

24. International Energy Agency 50, Global EV Outlook 2023, April 2023.

25. Trade in steel and aluminum products offers some exception. 
Adam S. Hersh and Robert Scott, Why Global Steel Surpluses Warrant U.S. Section 232 Import Measures, Economic Policy Institute, March 2021.
Adam S. Hersh and Robert Scott, Aluminum Producing and Consuming Industries Have Thrived Under U.S. Section 232 Import Measures, Economic Policy Institute, May 2021. 

26. Adam S. Hersh, “Testimony prepared for the U.S. International Trade Commission report on the USMCA Automotive Rules of Origin,” October 16, 2024.
Adam S. Hersh, “EPI comments to the Office of the United States Trade Representative on the US-Mexico-Canada Agreement with respect to automotive goods,” January 22, 2024.

27. Adam S. Hersh and Robert Scott, Why Global Steel Surpluses Warrant U.S. Section 232 Import Measures, Economic Policy Institute, March 2021.
Adam S. Hersh and Robert Scott, Aluminum Producing and Consuming Industries Have Thrived Under U.S. Section 232 Import Measures, Economic Policy Institute, May 2021. 

28. Adam S. Hersh, “EPI comments to the Office of the United States Trade Representative on the US-Mexico-Canada Agreement with respect to automotive goods,” January 22, 2024.

29. Isabella Cota, “Growth of China’s Automotive Sector in Mexico Worries the US,” EL PAÍS English, November 13, 2023.

30. Adam S. Hersh and Robert E. Scott, Why Global Steel Surpluses Warrant U.S. Section 232 Import Measures, Economic Policy Institute, March 2021.
Adam S. Hersh and Robert E. Scott, Aluminum Producing and Consuming Industries Have Thrived under U.S. Section 232 Import Measures, Economic Policy Institute, May 2021.
Robert E. Scott, The Manufacturing Footprint and the Importance of U.S. Manufacturing Jobs, Economic Policy Institute, January 2015.

31. Board of Governors of the Federal Reserve System (US), Motor Vehicle Assemblies: Heavy and Medium Truck Assemblies [MVAHMTRCKS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MVAHMTRCKS, last updated November 15, 2024.

32. These include anti-dumping and countervailing duty enforcements and Section 232 and Section 301 tariffs enacted under U.S. trade law in response to anti-competitive practices in the Chinese economy.
Adam Hersh, “Docket Number USTR–2023–0013: 2024 USMCA Autos Report,” January 17, 2024.
Connor Pfeiffer, “Will China Drive Its Electric Cars in From Mexico?” Wall Street Journal, March 5, 2024.
Alliance for American Manufacturing, On a Collision Course: China’s Existential Threat to America’s Auto Industry and Its Route Through Mexico, February 2024.

33. Scott Kennedy, Made in China 2025, Center for Strategic and International Studies, June 1, 2015.
Usha C.V. Haley, Putting the Pedal to the Metal: Subsidies to China’s Auto-Parts Industry from 2001 to 2011, Economic Policy Institute, January 2012.
Agnes Chang and Keith Bradsher, “Can the World Make an Electric Car Battery Without China?” New York Times, May 16, 2023.

34. Adam Hersh, “Docket Number USTR–2023–0013: 2024 USMCA Autos Report.” January 17, 2024.

35. Adam Hersh, “Docket Number USTR–2023–0013: 2024 USMCA Autos Report.” January 17, 2024.

36. Reuters, “China’s BYD to Launch First Pick Up Truck at Event in Mexico.” May 7, 2024.
Daniel J. McCosh, “BYD Seagull Lands in Mexico as Dolphin Mini,” Wards Auto, March 1, 2024.

37. Philip Blenkinsop, “EU slaps tariffs on Chinese EVs, risking Beijing backlash,” Reuters, October 30, 2024.
Jorge Valero and Alberto Nardelli, “EU Moves Toward Hitting China with Tariffs on Electric Vehicles,” Bloomberg, March 6, 2024.

38. Heejin Kim, “China’s CATL, BYD Dominate EV Battery Market as Demand Grows,” Bloomberg, October 11, 2023.

39. Mass Transit, “BYD Receives Largest Battery-Electric Bus Order in U.S. History,” November 14, 2019.
Emily Alpert Reyes, “Electric Vehicle Firm BYD Accused of Violating L.A. Wage Rules,” Los Angeles Times, December 1, 2015.
Jobs to Move America, “Protest Denounces Broken Promises by BYD Motors, Inc., Chinese Electric Bus Manufacturer to Taxpayers of LA” (press release), December 1, 2015.
Jennifer Medina, “Chinese Company Falling Short of Goal for California Jobs,” New York Times, October 25, 2013.

40. BYD, BYD Truck Fact Sheet (fact sheet), accessed May 2024.

41. Author’s discussion with A2Mac1 representatives.
Nick Carey and Ben Klayman, “Insight: Why BYD’s EV Exports Sell for Twice the China Price,” Reuters, April 26, 2024.

42. Laura He, “Tesla Cuts Prices in US, China and Germany as Competition Heats Up,” CNN Business, April 22, 2024.
Andrew J. Hawkins, “Ford Slashes Mustang Mach-E Prices Again as EV Price War Enters Its Second Year,” The Verge, February 20, 2024.
Riz Akhtar, “Nissan Slashes Driveaway Price of Electric Leaf to Below $40,000 as EV Price War Deepens,” The Driven, May 9, 2024.

43. Adam Hersh, China’s Path to Financial Reform, Center for American Progress, October 2014.

44. Like all models, input-output models including the IMPLAN model, make necessary simplifying assumptions about the real world we are trying to understand, which condition our interpretation of the results. IMPLAN® model. 2024. Data, using inputs provided by the user and IMPLAN Group LLC, IMPLAN System (data and software), 16905 Northcross Dr., Suite 120, Huntersville, NC 28078 www.IMPLAN.com.

45. S&P Global Mobility, Medium- and Heavy-Commercial Vehicle Forecast, May 2024.
S&P Global Mobility, Medium- and Heavy-Commercial Vehicle Forecast Services Dictionary, September 2023.

46. The historical S&P Global data correspond closely to publicly available industry economic data on MHDV production from the Federal Reserve. We estimate projected output values based on the linear regression of inflation-adjusted manufacturers’ vehicle shipment on truck assemblies.
Board of Governors of the Federal Reserve System (US), Motor Vehicle Assemblies: Heavy and Medium Truck Assemblies [MVAHMTRCKS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MVAHMTRCKS, last updated November 15, 2024.
U.S. Census Bureau, Manufacturers’ Value of Shipments: Heavy Duty Truck Manufacturing [A36CVS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/A36CVS, last updated Novemver 4, 2024.

47. For more detail, see Appendix Figures A–D.

48. UBS, “The Electric Vehicle Revolution Is Shifting into Overdrive” (web page), March 3, 2021.
International Council on Clean Transportation, E-Truck Virtual Teardown Study, June 2021.
Ben Sharpe and Hussein Basma, “A Meta-Study of Purchase Costs for Zero-Emission Trucks,” International Council on Clean Transportation Working Paper no. 2022-09, February 2022.

49. Zachary Shahan, “Ford CEO: 40% Less Labor To Build Electric Vehicles,” Clean Technica, November 16, 2022.
Jim Barrett and Josh Bivens, The Stakes for Workers in How Policymakers Manage the Coming Shift to All-Electric Vehicles, Economic Policy Institute, September 2021.

50. Turner Cotterman, Erica R. Fuchs, Kate Whitefoot, and Christophe Combemale, “The Transition to Electrified Vehicles: Evaluating the Labor Demand of Manufacturing Conventional Versus Battery Electric Vehicle Powertrains,” Energy Policy 188, 114064 (June 2022).
Andrew Weng, Omar Y. Ahmed, Gabriel Ehrlich, and Anna Stefanopoulou, “Higher Labor Intensity in US Automotive Assembly Plants After Transitioning to Electric Vehicles,” Nature Communications 15, 8088 (September 2024).

51. International Council on Clean Transportation, E-Truck Virtual Teardown Study, June 2021.
Ben Sharpe and Hussein Basma, “A Meta-Study of Purchase Costs for Zero-Emission Trucks,” International Council on Clean Transportation Working Paper no. 2022-09, February 2022.

52. Given current tight labor market conditions near full employment levels, our results should be interpreted as supporting employment in MHDV manufacturing and parts industries, rather than creating new jobs. This likely would entail job-shifting—drawing workers employed in other industries into motor vehicle manufacturing. On average, these jobs are better paid and yield higher productivity than other jobs, meaning there will be individual and social welfare gains from such job shifting even if there is no net change in total employment.

53. Global Commercial Vehicle, “Global Memorandum of Understanding on Zero-Emission Medium- and Heavy-Duty Vehicles” (web page), accessed May 2024.

54. Hussein Basma, Claire Buysse, Yuanrong Zhou, and Felipe Rodriguez, Total Cost of Ownership of Alternative Powertrain Technologies for Class 8 Long-Haul Trucks in the United States, International Council on Clean Transportation, April 2023.
North American Council for Freight Efficiency, “Medium-Duty Electric Trucks: Cost of Ownership” (web page), accessed May 2024.
Andrew Burnham, David Gohlke, Luke Rush, Thomas Stephens, Yan Zhou, Mark A. Delucchi, Alicia Birky, Chad Hunter, Zhenhong Lin, Shiqi Ou, Fei Xie, Camron Proctor, Steven Wiryadinata, Nawei Liu, and Madhur Boloor, Comprehensive Total Cost of Ownership Quantification for Vehicles with Different Size Classes and Powertrains, Argonne National Laboratory, April 2021.

55. James Temple, “Trump Wants to Unravel Biden’s Landmark Climate Law. Here Is What’s Most at Risk,” MIT Technology Review, February 26, 2024.
Senate Committee on Energy & Natural Resources, “Barrasso, Rodgers Pen Op-Ed: The Biden Climate Legacy: American Weakness,” Republican News, October 19, 2023.
Houston Keene, “One Year Later, Senate Republicans Give Inflation Reduction Act an ‘F’: ‘Reckless Spending Spree’,” Fox News, August 16, 2023.
House Committee on Appropriations, “House Republican Bills Attack and Undermine the Inflation Reduction Act and Bipartisan Infrastructure Law,” n.d.

56. Al Root, “How Much UAW Wage Increases Will Really Raise Car Prices,” Barron’s, October 1, 2023.
Adam S. Hersh, “UAW-Automakers Negotiations Pit Falling Wages Against Skyrocketing CEO Pay,” Working Economics Blog (Economic Policy Institute), September 12, 2023.

57. Disruptions can be expected to plague both the supply- and demand-sides, as consumers will face greater uncertainty in committing to invest in long-lived durable goods with more uncertain prospects for future operational costs.

58. Leo Banks, How Inflation Reduction Act Electric Vehicle Incentives Are Driving a U.S. Manufacturing Renaissance, Center for American Progress, November 2023.

59. Department of Commerce Bureau of Industry and Security, “Securing the Information and Communications Technology and Services Supply Chain: Connected Vehicles,” Docket No. 240227-0060. March 1, 2024.

60. Teamsters Local 492, “What Is Card Check Neutrality?” (web page), October 4, 2017.

61. Community Benefits Plan template, accessible here.

62. Good Jobs First, “Key Reforms: Clawbacks” (web page), accessed May 2024.

Introduction

In 2023, the Biden-Harris administration selected the Gulf Coast as the location of one of seven Regional Clean Hydrogen Hubs (H2Hubs), designating up to $1.2 billion in federal funding to develop clean hydrogen production facilities in Texas and Louisiana. This investment will help the U.S. economy transition away from carbon-emitting energy sources and has the potential to create a long-lasting and growing workforce in Texas for hydrogen production and use.

It is vital that this large public investment creates high-quality careers for Texas workers, both those constructing new facilities as well as those who operate hydrogen plants. Without intentional policy choices, this outcome is not guaranteed. The Community Benefits Plan (CBP) being negotiated for the hub must include provisions that protect workers’ right to organize, set high wage and working standards, and create equitable pathways for workers to enter the industry. Setting high labor standards and respecting workers’ freedom to organize in unions will not only help Texas workers earn their fair share of the federal investments but also spur the hydrogen industry to grow quickly and efficiently.

Hydrogen industrial policy background

Hydrogen is an important technology for reducing carbon emissions to fight climate change, either through renewable generated hydrogen production or natural gas generated hydrogen with carbon sequestration. Scaling up the hydrogen industry will also create thousands of good jobs, reduce air pollution, and increase state and national energy resiliency.

Hydrogen technology and infrastructure is an important facet of the Biden-Harris administration’s industrial policy agenda. In 2021 and 2022, Congress passed the Bipartisan Infrastructure Law (BIL) and Inflation Reduction Act (IRA), each of which have provisions that invest large amounts of public money into the research and scaling up of hydrogen technology. Both BIL and the IRA contain requirements and incentives to increase labor standards on hydrogen projects and create community benefits.

The BIL H2Hubs program allocates $7 billion to the Department of Energy for the development of seven hubs for hydrogen production, delivery, and end-use (OCED n.d.a). The goals of the H2Hubs program are to accelerate hydrogen technology development and usage across the U.S. and create good construction and manufacturing jobs in this nascent industry.

The Gulf Coast H2Hub in Texas is likely to receive up to $1.2 billion in federal subsidies from BIL (OCED n.d.b.). Each H2Hub has a distinct mixture of investments and hydrogen technologies being developed. The Gulf Coast hub will catalyze investment in large-scale hydrogen production using both natural gas and carbon capture as well as renewable powered electrolysis.1 The hub plans to develop salt cavern hydrogen storage, a large open access hydrogen pipeline, and multiple hydrogen refueling stations. The hydrogen produced will be used to power industrial processes like creating ammonia in addition to fueling fuel cell trucks and other forms of transportation. In total, the hub is anticipated to create 35,000 construction jobs and 10,000 permanent jobs.

To be awarded funding, the Gulf Coast Hub must negotiate a Community Benefits Plan with local stakeholders to set labor standards and other community benefits for Texas hydrogen projects. The CBP must address four interdependent policy priorities: 1) engaging communities and labor; 2) investing in America’s workforce; 3) advancing diversity, equity, inclusion, and accessibility; and 4) implementing the Justice40 initiative2 (OCED n.d.c). The CBP for the hub provides an opportunity for labor and community groups to secure legally binding agreements for high labor standards in the hydrogen industry.

The federal government is not only providing billions of dollars’ worth of subsidies for hydrogen companies but is also committed to demand-side support of the hydrogen industry (CEA 2023). BIL invests up to $1 billion to ensure the early commercial viability of hydrogen during the riskiest early years of the industry (DOE 2023).

During the construction and early operation of hydrogen plants, producers in Texas are likely to receive clean energy tax credits created by the IRA. In particular, the Section 45V Clean Hydrogen Production Tax Credit and Section 48 Energy Credit both provide strong incentives for private sector investment in hydrogen production. Both hydrogen credits increase to five times in value if a tax credit recipient meets the prevailing wage and apprenticeship requirements in the IRA (Ding, Baldino, and Zhou 2024). These incentives are intended to set high labor standards during the construction of hydrogen facilities.

Texas hydrogen projects will also have access to a variety of loans through the Department of Energy’s Loan Program Office (LPO) (LPO n.d.). The IRA increased the LPO’s existing loan programs by approximately $100 billion in new loan authority (LPO 2023). Hydrogen businesses could benefit from several PLO authorities including Title 17 Section 1703 Innovative Energy and Innovative Supply Chain Projects and Title 17 Section 1706 Energy Infrastructure Reinvestment Projects (Section 1706).

The historic and multifaceted investment by the federal government into Texas hydrogen production has successfully created private-sector investment in the industry. The Gulf Coast Hub is led by an industry group called HyVelocity, Inc., which in turn includes large energy corporations including AES Corporation, Air Liquide, Chevron, ExxonMobil, Mitsubishi Power Americas, Orsted, and Sempra Infrastructure (HyVelocity n.d.). These companies are investing in the nascent industry because hydrogen production is expected to become extremely economically valuable. The Gulf Coast Hub could generate $100 billion in additional GDP in Texas by 2050 (Ati et al. 2023).

The massive outlay of public dollars to develop the hydrogen industry demands intentional investment in the Texas workers who will build and operate hydrogen plants. The CBP for the Gulf Coast Hub should include legally binding agreements between hydrogen producers and labor that will protect workers’ right to organize, set high wage and working standards, and create equitable pathways for workers to enter the industry.

Securing high job quality for the hydrogen workforce

According to the U.S. Department of Energy, the Gulf Coast Hub will create approximately 45,000 jobs (OCED n.d.b). The Rhodium Group splits these jobs into two categories: plant investment jobs and operation and maintenance (O&M) jobs (Bower et al. 2023). Plant investment jobs are those needed to construct, engineer, and build hydrogen facilities, while O&M jobs are the permanent ongoing jobs needed to operate the plant.3 Most jobs associated with hydrogen will be plant investment jobs. The Rhodium Group estimates that for a conventional hydrogen plant being retrofitted for carbon capture, 520 jobs will be created for building and implementing the retrofits, while 80 jobs will be created for the ongoing operation of the plant (Bower et al. 2023).

Plant investment

Some of the key types of jobs involved in a hydrogen plant’s development include workers in the construction trades; metal workers and assemblers; and machinery installers, maintenance, and repairers. Prevailing wage standards are the first essential policy for ensuring high job quality for workers building hydrogen facilities.

The federal Davis-Bacon Act mandates that contractors and subcontractors on federally funded construction must pay workers at least the prevailing wage. The prevailing wage is a standard hourly rate of wages and benefits paid to workers performing similar work in a specific geographic area. Prevailing wage standards like Davis-Bacon have been shown to boost workers’ pay and benefits and reduce racial pay gaps (Mangundayao, Poydock, and Sherer 2022). All projects receiving federal money in the Gulf Coast Hub will be subject to Davis-Bacon prevailing wage standards.

The Community Benefits Plan in the H2Hubs program also provides a powerful opportunity to strengthen job standards through the inclusion of Project Labor Agreements (PLAs). PLAs specify workers’ wages and fringe benefits and may include provisions requiring contractors to hire through union hiring halls or develop procedures for resolving employment disputes. PLAs also often include language that prevents workers striking or from employers locking workers out.

PLAs are not union contracts and both union and nonunion employers can bid on projects, but incentivizing the use of union labor has other benefits. Research shows that unionized construction labor is 14% more productive than nonunion labor (McFadden, Santosh, and Shetty 2022). PLAs are effective at reducing construction costs, making the completion of projects more efficient, while also setting high health and safety standards (Mangundayao, McNicholas, and Poydock 2022). Unionized construction workers also earn higher, and more often family-sustaining, wages. On average, unionized construction workers earn 35.6% more than other construction workers accounting for education, geography, and other characteristics (Scott et al. 2022). Unions also have long been shown to decrease wage disparities between white workers and workers of color and between men and women.

PLAs can also help create better and more equitable pathways into construction jobs (Belman and Bodah 2010). Hydrogen projects should set high requirements for hours worked by qualified apprentices. A qualified apprentice is a worker participating in a high quality, structured education and training programs vetted and approved by the U.S. Department of Labor or a state apprenticeship agency, otherwise known as a registered apprenticeship (ApprenticeshipUSA n.d.a). Registered apprenticeships are essential to developing a skilled and equitable workforce because they work directly with employers to meet industry standards and prioritize diversity of hiring while paying apprentices fairly for their hands-on work (ApprenticeshipUSA n.d.b).

Texas hydrogen projects can also strengthen local communities by using local hire policies (sometimes called targeted hire) to prioritize recruitment of individuals who reside in the area where a project is being built (Lawliss, Finfer, and Sherer 2022). Targeted hire can also be aimed towards groups such as people of color, women, veterans, or people with disability. Texas should require PLAs with local hire provisions for hydrogen projects to ensure local community members benefit from the new job opportunities.

The Inflation Reduction Act also includes tax credits to incentivize high labor standards and workforce development. Texas hydrogen projects will likely be eligible for IRA tax credits for clean hydrogen production and/or carbon sequestration. These credits quintuple in value if a project commits to prevailing wage and specific apprenticeship targets (Ding, Baldino, and Zhou 2024). Projects receiving BIL funding must already meet Davis-Bacon standards, so they will be eligible for the expanded tax credit if they meet the apprentice targets as well. PLAs can ensure that hydrogen projects meet the IRA tax credit criteria, benefiting both the firms building new facilities and the workers and communities who will be part of the industry.

Operations and maintenance

Once hydrogen facilities in Texas are built, operations and maintenance workers must produce hydrogen effectively and safely. At a conventional hydrogen facility retrofitted for carbon capture, these O&M occupations include machinery installers, maintenance, and repairers; metal workers and assemblers; freight movers; and production occupations (Bower et al. 2023).4 The CBP can be used to make sure these jobs are well paid, safe, and provide opportunity to key communities.

Texas, particularly the Houston and Gulf region, is a global hub for the oil and gas industry. The state also has a large base of chemical manufacturing, gas production, and other manufacturing industries (CHF 2022). Texas produces a third of total hydrogen production in the U.S. (Day 2024).5 Many occupational skills already used in oil, gas, and other gas manufacturing industries in Texas should be transferable to hydrogen production (Wells 2022). The exact distribution of skills and occupations in O&M is not clearly developed, but many jobs will not require college degrees (DOE 2008; Bezdek 2019).

Business groups, labor partners, and educational institutions in Texas must collaborate to develop training and education pathways for hydrogen workers. As with construction and other trade apprenticeships, these training programs should be paid apprenticeship opportunities, and intentionally recruit local workers, workers of color, and women. There should also be clear pathways for Texas oil and gas workers to transition to the hydrogen workforce, with wage insurance, retraining support, and re-employment guarantees (Pollin et al. 2021). The CBP can be used to negotiate these partnerships and create an equitable workforce development pipeline into the industry.

Although hydrogen does not release toxins like fossil fuels when burned, in many contexts it is more flammable, and its flame is almost invisible, putting hydrogen O&M workers at considerable risk (OEERE n.d.). Skilled and empowered workers are the front line for ensuring proper hydrogen safety practices.

Research shows that by giving workers a stronger voice on the job, unions improve workplace safety and health across a wide range of industries (Dean, McCallum, and Venkataramani 2022; Manzo IV, Jekot, and Bruno 2021; Leigh and Chakalov 2021). To that end, it is vital that hydrogen O&M workers have the chance to organize into unions. The Gulf Coast Community Benefits Plan should include language that requires labor peace agreements (LPAs) for workers at hydrogen facilities.

LPAs are contracts between an employer and a union where the employer agrees to remain neutral and not interfere with union organizing. In turn, unions agree not to engage in picketing, work stoppages, or other economic interference with employers. U.S. employers are charged with violating federal law in more than 40% of union elections and spend more than $400 million a year on “union avoidance” consultants (McNicholas et al. 2019; McNicholas et al. 2023). These strategies undermine workers’ legal right to organize but are treated by many employers as a cost of doing business. Requiring LPAs for hydrogen would help prevent illegal employer behavior, secure smooth plant operation, and give workers a fair opportunity to organize.

Conclusion

The single greatest influence on job quality is workers’ bargaining power. When policies set high standards and workers can form unions, it leads to better jobs. Union jobs typically have higher wages, better health care benefits, better retirement safety, and safer working conditions. In 2023, 64% of Texas workers said unions are good for workers, but only 5.4% of Texas workers were covered by a union contract (Posson, Halbrook, and Cervantes 2024). This disconnect is a product of Texas state policies like its so-called “right-to-work” law and other limitations on collective bargaining rights.

When policy does not support worker power, the results are predictable. Workers in the rapidly growing Texas solar and wind energy industries report low wages and high levels of injuries and illness (Behgam et al. 2024). To avoid this path with the Gulf Coast Hub, Texans must build on the strong labor standards incentivized through the federal BIL and IRA. The Community Benefits Plan for the Gulf Coast Hub should include project labor agreements, labor peace agreements, and related measures that empower the Texas hydrogen workforce.

Notes

1. Other hydrogen hubs have different technological makeups and will focus on other technologies like car fuel cells (OCED n.d.b).

2. The Justice40 initiative directs 40% of the overall benefits of certain federal investments to flow to disadvantaged communities. The Justice40 initiative was established by executive order by the Biden-Harris administration.

3. The Rhodium Group’s definition of plant investment jobs also includes the workers who maintain supply chains for hydrogen plant construction, but this report focuses on workers directly building hydrogen facilities.

4. Production occupations include inspectors, testers, processing technicians, and chemical equipment operators and tenders.

5. Most of this hydrogen is created with natural gas, which means it must be retrofitted with carbon capture technology to reduce emissions.

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