Saturday, June 15, 2024
NewsPotential Loopholes May Undermine U.S. Tariffs on Chinese Electric Vehicles

Potential Loopholes May Undermine U.S. Tariffs on Chinese Electric Vehicles

Trade advantages in Mexico could provide a backdoor for Chinese EVs into the U.S. market despite high tariffs.


– Mexico’s trade advantages and USMCA flexibility may allow Chinese EVs to bypass U.S. tariffs.

– BYD’s new plant in Mexico positions it strategically to access North American markets.


Recent moves by the Biden administration to raise tariffs on Chinese electric vehicles (EVs) aim to protect the U.S. auto market from cheaper imports. However, experts suggest that these tariffs might not be sufficient to block Chinese EVs from entering the market. Strategic trade advantages in Mexico and the flexibility within the United States-Mexico-Canada Agreement (USMCA) could provide alternative routes for Chinese manufacturers.

The Biden administration’s tariff increases on Chinese EVs, from 27.5 % to 102.5 % are intended to curtail the influx of low-cost Chinese EVs which are heavily subsidized by the Chinese government. BYD Co. quickly announced plans to build a plant in Mexico following this tariff hike and although it claims it has no immediate plans to ship vehicles from Mexico to the U.S., the establishment of a manufacturing base in North America positions the company advantageously for future expansion.

BYD just revealed a plug-in hybrid pickup truck in Mexico

Mexico plays a critical role in the global EV supply chain due to its numerous trade agreements and strategic location. The USMCA mandates that 75 percent of auto components must be produced in North America to qualify for free trade benefits. However, vehicles produced in Mexico using Chinese components would still be subject to only a 2.5 % tariff, a minimal cost compared to the 100 % duty on direct imports from China. This significant disparity raises concerns that Chinese EVs could bypass stringent U.S. tariffs by leveraging Mexico’s trade benefits.

While tariffs are a primary tool for restricting Chinese EVs, they might not be enough, as reported by Automotive News. The U.S. administration could investigate potential circumvention of trade restrictions by Chinese companies using Mexican facilities. The Department of Commerce has previously taken such actions in other industries, such as solar panels. Furthermore, the United Auto Workers (UAW) union is advocating for an increase in the 2.5 % tariff on vehicles and components that do not meet USMCA requirements.

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Matt St-Pierre
Matt St-Pierre
Trained as an Automotive Technician, Matt has two decades of automotive journalism under his belt. He’s done TV, radio, print and this thing called the internet. He’s an avid collector of many 4-wheeled things, all of them under 1,500 kg, holds a recently expired racing license and is a father of two. Life is beautiful. Send Matt an emai

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