Industry Group Warns of Potential Negative Impact on US Auto Sector from Affordable Subsidized Chinese EVs Imported from Mexico
As the global electric vehicle (EV) market continues to grow, concerns are rising in the United States about the potential negative impact of affordable subsidized Chinese EVs imported from Mexico. The Alliance for American Manufacturing, an industry group, has warned that the influx of these vehicles could lead to mass plant closures and job losses in the US auto sector.
In a recently released report titled “China’s Existential Threat to America’s Auto Industry and its Route Through Mexico,” the group expressed significant concerns about Chinese EV dominance and its potential to wipe out the century-long US auto industry. The report highlights the cheap prices of Chinese autos, which are made possible by the backing and funding of the Chinese government. It argues that this could be an extinction-level event for the US auto sector, which plays a crucial role in the national economy.
The warning comes as Chinese EV firms, such as BYD, Cherry, and SAIC Motors, heavily invest in Mexico to take advantage of favorable tariffs under a trade agreement between the US and its neighboring trading partner. The report points out that imports of auto parts from China to the US have decreased by 17 percent between 2017 and 2023, while imports from Mexico have increased by 20 percent during the same period. This suggests that China-made car components are bypassing US tariffs through Mexico.
Although the US auto sector has been protected by a 25 percent tariff on Chinese-made EVs imposed during the Trump administration, which has been renewed under the Biden administration, the industry group argues that measures should be taken to prevent automobiles and parts manufactured in Mexico by Chinese companies from benefiting from a North American free trade agreement. They call for the “commercial backdoor” left open to Chinese auto imports to be shut before it leads to plant closures and job losses in the US.
The Chinese Communist Party (CCP) has been supporting its EV industry through substantial government subsidies and preferential policies. According to MIT Technology Review, the CCP has poured $29 billion into its EV sector through subsidies and tax breaks. As a result, China’s EV exports have increased by 851 percent in the last three years and now account for 60 percent of the global EV market.
The industry group urges the Biden administration to implement policies to counter this threat to the US auto industry. They recommend raising tariffs further on made-in-China vehicles, tightening and fully enforcing the US-Mexico-Canada Agreement’s Rules of Origin (ROO) to prevent leakage, and excluding components and vehicles made by companies headquartered in non-market economies like China from preferential treatment.
This warning echoes concerns raised by other industry leaders and policymakers. Tesla CEO Elon Musk has warned that Chinese EVs could demolish most other car companies in the world if trade barriers are not established. In Europe, Chinese EVs enjoy a lower tariff of 10 percent and benefit from the EU’s green policy, leading to stiff competition for EU automakers in their own market.
The threat posed by heavily subsidized Chinese imports to the American auto industry is significant, according to the Alliance for American Manufacturing. The severity of this threat will depend on how federal policymakers respond to it. The group emphasizes the need for strengthened trade enforcement and the full implementation of existing domestic industrial policies to turn back these imports. They stress that immediate action is required, as there is no time to lose.
In conclusion, the potential negative impact of affordable subsidized Chinese EVs imported from Mexico on the US auto sector is a cause for concern. The Alliance for American Manufacturing warns that these imports could lead to plant closures and job losses in the US, posing an existential threat to the century-long auto industry. Urgent action is needed from policymakers to prevent this scenario from becoming a reality. Strengthened trade enforcement and the implementation of domestic industrial policies are essential to safeguarding the US auto industry against heavily subsidized Chinese imports.
