©Reuters. FILE PHOTO: A view shows the urban area of the municipality of Santa Catarina near the land where Tesla has indicated it could build a new gigafactory, in Santa Catarina, on the outskirts of Monterrey, Mexico, February 28, 2023. REUTERS/Daniel Becerril/ Phil
By David Shepardson
WASHINGTON (Reuters) – The U.S. government should block the import of low-cost Chinese cars and parts from Mexico, a U.S. manufacturing advocacy group said on Friday, warning that it could threaten the survival of American auto companies .
“The introduction of cheap Chinese cars — which are so cheap because they are backed by the power and funding of the Chinese government — into the American market could end up being an extinction-level event for the U.S. auto industry,” l ‘Alliance for America. The production states this in a report.
The group argues that the United States should work to prevent cars and parts made in Mexico by China-based companies from benefiting from a North American Free Trade Agreement. “The trade back door left open to Chinese auto imports should be closed before it causes mass plant closures and job losses in the United States,” the report said.
Vehicles and components made in Mexico are eligible for preferential treatment under the U.S.-Mexico-Canada Trade Agreement, as well as a $7,500 tax credit for electric vehicles (EVs), the report notes.
The Chinese Embassy in Washington said in response that China’s automotive exports “reflect the high-quality development and strong innovation of China’s manufacturing industry… The leaping development of China’s automotive industry has provided the world with affordable and high quality”.
The issue has attracted new interest following news that China’s BYD (SZ:) plans to open an electric vehicle factory in Mexico. BYD, known for its cheaper models and more diverse lineup, recently overtook its biggest rival, Tesla (NASDAQ:), to become the world’s top electric vehicle maker by sales.
Tesla announced plans to build a factory in the northern Mexican state of Nuevo Leon nearly a year ago. In October, Mexico said a Chinese Tesla supplier and a Chinese technology company would invest nearly $1 billion in the state.
A bipartisan group of U.S. lawmakers urged the Biden administration to raise tariffs on Chinese-made vehicles and study ways to block Chinese companies from exporting to the United States from Mexico.
A group of lawmakers urged U.S. Trade Representative Katherine Tai to raise the 27.5% tariff on Chinese vehicles and said her office “must also be prepared to deal with the next wave of (Chinese) vehicles that will be exported by our other trading partners, such as Mexico, as (Chinese) automakers seek to strategically establish operations outside of (China).”
John Bozzella, CEO of the Alliance for Automotive Innovation, said the U.S.’s proposed environmental regulations could allow China to gain “a stronger foothold in America’s electric vehicle battery supply chain and ultimately in our automotive market”.
The U.S. Treasury released guidance in December on a $7,500 tax credit for electric vehicles, aimed at shifting the U.S. electric vehicle supply chain away from China.