David Shepardson
WASHINGTON (Reuters) – The U.S. government should block imports of low-cost Chinese cars and parts from Mexico, a U.S. manufacturers’ rights group said on Friday, warning they could threaten the viability of American auto companies.
“The entry into the American market of cheap Chinese cars that are so inexpensive because they are backed by the power and funding of the Chinese government could ultimately become an extinction level event for the US auto sector,” the Alliance for America said. This is stated in the production report.
The group argues that the United States should work to prevent vehicles and parts made in Mexico by companies headquartered in China from benefiting from the North American Free Trade Agreement. “The commercial backdoor left open to Chinese auto imports must be closed before it leads to widespread plant closures and job losses in the United States,” the report said.
The report notes that vehicles and parts made in Mexico may qualify for preferential treatment under the U.S.-Mexico-Canada Trade Agreement, as well as a $7,500 electric vehicle (EV) tax credit.
The Chinese Embassy in Washington said in response that China’s automobile exports “reflect the high-quality development and strong innovation of China’s manufacturing industry… The rapid development of the Chinese automobile industry has provided the world with cost-effective, high-quality products.”
The issue has gained renewed interest following news reports that Chinese company BYD (SZ:) plans to open an electric vehicle manufacturing plant in Mexico. Known for its cheaper models and more diverse lineup, BYD recently overtook its biggest rival Tesla (NASDAQ:) to become the world’s largest electric vehicle maker by sales.
Almost a year ago, Tesla announced plans to build a plant in the northern Mexican state of Nuevo Leon. In October, Mexico said Chinese supplier Tesla and a Chinese technology company would invest nearly a billion dollars in the state.
A bipartisan group of US lawmakers has called on the Biden administration to raise tariffs on Chinese-made cars and explore ways to prevent Chinese companies from exporting to the United States from Mexico.
A group of lawmakers called on U.S. Trade Representative Katherine Tai to raise the 27.5% tariff on Chinese cars and said her office “must also be prepared to deal with the coming wave of (Chinese) cars that will be exported from our other trading partners, such as Mexico as (Chinese) automakers seek to strategically set up production outside (China).”
Alliance for Automotive Innovation CEO John Bozzella said proposed U.S. environmental regulations could allow China to “get a foothold in America’s electric vehicle battery supply chain and ultimately in our auto market.”
In December, the U.S. Treasury released guidance for a $7,500 electric vehicle tax credit aimed at decoupling the U.S. electric vehicle supply chain from China.