The United States should implement trade measures to prevent an influx of subsidized, cheap Chinese electric vehicles (EVs) from Mexico, which threatens the U.S. auto industry, according to an industry group.
“The introduction of cheap Chinese autos–which are so inexpensive because they are backed with the power and funding of the Chinese government–to the American market could end up being an extinction-level event for the U.S. auto sector, whose centrality in the national economy is unimpeachable,” the group stated.
The warning comes amid reports that Chinese EV firms have heavily invested in Mexico to benefit from favorable tariffs under a trade agreement between Washington and its neighboring trading partner.
The report pointed out that between 2017 and 2023, auto part imports from China to the United States fell by 17 percent, while imports from Mexico rose by 20 percent for the same period, which indicated that China-made components started to bypass U.S. tariffs via its southern neighbor.
The U.S. auto sector hasn’t faced fierce competition from China-made EVs because of the 25 percent tariff imposed since the Trump administration and renewed during the Biden administration.
However, the group argues that the United States should work to prevent automobiles and parts manufactured in Mexico by companies headquartered in China from benefiting from a North American free trade agreement.
“The commercial backdoor left open to Chinese auto imports should be shut before it causes mass plant closures and job losses in the United States,” the report reads.
The group calls on the Biden administration to issue policies to head off the threat to the U.S. auto industry.
‘No Time to Lose’
Earlier this year, Tesla CEO Elon Musk warned that “if there are no trade barriers established, they [Chinese EVs] will pretty much demolish most other car companies in the world.”In Europe, China’s EVs enjoy a lower tariff of 10 percent and benefit from the EU’s green policy, which has opened up opportunities for them in the bloc. As a result, EU automakers are losing the EV competition in their own market, mainly to Chinese competitors.
“And their price is kept artificially low by huge state subsidies,” she said.
The Alliance for American Manufacturing warned that the threat posed to the American auto industry by “heavily subsidized Chinese imports is significant, and the level of its severity will depend greatly on how federal policymakers respond to it.”
“[A] dedicated and concerted effort to turn those imports back requires greatly strengthened trade enforcement and fully implementing existing domestic industrial policies,” the group stated. “This effort should be undertaken immediately, there is no time to lose.”