America’s auto industry has grown concerned that Chinese carmakers may be preparing to set up shop in Mexico to exploit North American trade rules
It’s a scenario that terrifies America’s auto industry.
Chinese carmakers set up shop in Mexico to exploit North American trade rules. Once in place, they send ultra-low-priced electric vehicles streaming into the United States.
As the Chinese EVs go on sale across the country, America’s homegrown EVs — costing an average of $55,000, roughly double the price of their Chinese counterparts — struggle to compete. Factories close. Workers lose jobs across America’s industrial heartland.
Ultimately, it would all become a painful replay of how government-subsidized Chinese competition devastated American industries from steel to solar equipment over the past quarter-century. This time, it would be electric vehicles, which America’s automakers envision as the core of their business in the coming decades.
Low-priced Chinese EVs pose a potentially “extinction-level event’’ for America’s auto industry, the Alliance for American Manufacturing has warned.
Especially worrisome: The 2020 U.S.-Mexico-Canada Agreement would potentially let Chinese cars assembled in Mexico enter the United States duty-free or at a nominal 2.5% tariff rate. Either way, China could sell its EVs well below typical U.S. prices.
To defuse the threat, the U.S. has options. Customs officials could rule that Chinese EVs don’t qualify for the low-duty or duty-free benefits of being made in Mexico. U.S. policymakers could also pressure Mexico to keep Chinese vehicles out of that country. Or they could bar Chinese EVs from the U.S. on the grounds that they would threaten America’s national security.
The threat from Beijing is emerging just as U.S. automakers face slowing EV sales. High prices and a shortage of charging stations are keeping many American consumers away.
Cheap Chinese EVs might help by pushing down prices, accelerating sales and encouraging investment in charging stations.
