The administration said the freeze would boost USA oil consumption by about 500,000 barrels of oil a day by the 2030s, and argued it would prevent up to 1,000 traffic fatalities per year by reducing the price of new vehicles and so prompting people to buy newer, safer vehicles more quickly.
California is expected to challenge the withdrawal of the waiver in court.
The proportion of passengers killed in cars that are older than 18 years is nearly double that of cars that are newer than three years, according to a recent National Highway Traffic Safety Administration (NHTSA) study.
The prospect of an extended legal fight has discomfited automakers, who had asked the administration to relax the Obama-era rules but don't want to see the US market split in two, with different models of cars required in blue and red states. "This will lead to more polluting vehicles, cost consumers more and it won't save any lives".
The proposal argues that freezing the Obama-era standards at 2020 levels through 2026 will save consumers money and increase safety on the nation's roads. Under the Trump administration's preferred proposal, that would drop to 29.6 miles per gallon, a reduction in nationwide fuel efficiency of about 21 percent. The state, and others that have adopted the standard, have vowed to fight in court.
The Trump administration is arguing that the multiple standards complicate regulation.
Schwarzenegger added that he's "sick and exhausted of these fake conservatives who believe in states' rights to make their own policies - as long as state policy is to pollute more". Critics said it would accelerate climate change and increase fuel prices.
The administration also contends that hiking USA oil consumption by 2 to 3 percent over forecast levels would have a minimal impact on the environment, boosting global average temperature by just "3/1000th of a degree Celsius by 2100".
The Natural Resources Defense Council said the administration is "driving our auto future in reverse".
About a third of these projected savings, or $198 billion, are tied to the agencies' assertion that, by slowing pace at which new vehicles get more expensive, they'll allow people to replace older and less-safe cars more rapidly.
Environmental groups who support the gas mileage standards that aimed to reduce air pollution slammed the proposal.
That ignores the fact that more fuel-efficient vehicles are cheaper to operate since drivers have to buy less gas. But any plans to freeze clean air rules and strip California of its power to set its own rules is drawing fire from members of both parties.
Schwarzenegger and Trump have repeatedly criticized each other over the years, including during Trump's presidency. An Obama-era analysis found no harm to safety from making cars more efficient.
Besides, California - which is essentially now a foreign country - should not control the auto market and decide pollution and mileage standards for the rest of the country.