Recently, according to reports from Bloomberg and other US media, former US President and Republican presidential candidate Donald Trump said during a campaign rally at the Dayton International Airport in Ohio that if he was re-elected as president, he would Impose 100% tariff on cars produced by Chinese companies in Mexico. Donald Trump claimed that the vehicle manufacturing plant that Chinese companies plan to build in Mexico will not employ Americans and will not sell in the United States.
Currently, Chinese-made electric vehicles are subject to a 27.5% tariff when imported into the United States, including the 2.5% regular tariff levied on imported cars and the additional 25% tariff imposed by the Donald Trump administration on Chinese-made cars starting in 2018. . In contrast, cars produced in factories in Mexico can enjoy the lowest tariff of 2.5% when entering the United States. And if the cars produced at the plant meet the strict local parts standards stipulated in the 2020 U.S.-Mexico-Canada Agreement, they may not even have to pay tariffs. The United States-Mexico-Canada (USMCA) trade agreement, approved in 2018 and taking effect in 2020, stipulates that auto companies with 75% of their parts manufactured in Mexico, the United States or Canada are eligible for complete tariff exemption.
“Jay Timmons”
In response to Donald Trump’s clamor against Chinese electric vehicles, Jay Timmons, president of the National Association of Manufacturers (NAM), the largest U.S. manufacturing industry trade association, expressed clear opposition when attending an event in Washington, saying that tariffs The policy is actually counterproductive, harming the U.S. manufacturing industry, and warning the U.S. government not to impose more import tariffs on Chinese products in the future. Timmons warned that this move may seriously damage the global trade liberalization system, and “this shot will be counterattacked.”
Also present at the same event that day was Montezuma, Mexico’s ambassador to the United States. He also criticized Donald Trump’s tariff policy as being detrimental to free trade and North America and would “hinder the entire relationship.” It is understood that Mexico is the seventh largest automobile producer and the fifth largest automobile parts producer in the world, and automobile manufacturing is one of the country’s important industries. According to data from the Mexican Automobile Industry Association, the output value of the automobile industry accounts for 3.8% of Mexico’s GDP and 20.5% of the manufacturing output value.
Currently, Mexico is vigorously promoting the transformation of the automobile industry, hoping to convert half of its automobile production to electric vehicles by 2030. Mexico has abundant reserves of lithium, a basic material for electric vehicle batteries, and the Mexican government has said it will expand cooperation with other countries to produce lithium-ion batteries for automobiles. Bloomberg mentioned in a report in February that Chinese auto parts manufacturers have begun setting up factories in Mexico to meet the needs of Tesla’s upcoming factory in the country. Chinese automakers BYD, SAIC MG and Chery also plan to build factories in Mexico in 2024.
Last year, Mexico surpassed China as the United States’ top trading partner, according to the U.S. Department of Commerce, but that could change if Donald Trump returns to the White House. Capital Economics, a British economic research consultancy, believes that Donald Trump threatens Mexico’s newfound status. Capital Economics strategists said in a report that Mexico may face economic and trade risks if Donald Trump chooses to abolish or adjust the United States-Mexico-Canada Agreement (USMCA). If that happens, the U.S.-Mexico relationship could face more friction on top of Donald Trump’s current focus on southern border security.
However, even if Joe Biden is re-elected, Chinese auto parts and vehicle manufacturers’ investments in Mexico will still face risks.
The British “Financial Times” reported at the end of last year that China’s three major electric vehicle manufacturers were negotiating to build factories in Mexico, and the United States had “raised concerns” to Mexico about this. Mexican officials admit they must be cautious when considering Chinese investment because of the risk of upsetting its northern neighbor. The American Manufacturing Alliance urged the Joe Biden administration in a report on February 23 to take measures to prevent the import of cars and parts made by Chinese companies from Mexico, claiming that otherwise “the viability of U.S. auto companies may be threatened.” Shu Jueting, spokesperson of the Chinese Ministry of Commerce, said that practical cooperation between China and Mexico is a matter between two sovereign countries. It is a normal commercial activity carried out by enterprises of both sides based on international rules and market principles. No third party has the right to interfere.
Analysts believe that based on various factors, although Mexico is regarded as a third-party channel for domestic car companies to enter the US market, whether Joe Biden or Donald Trump comes to power, this channel will be blocked at any time. risk. Neil Shearing, chief economist at Capital Economics, said in a new memo: “Investors may be worried about Mr. Donald Trump’s potential return and the threat of renewed trade wars, but regardless of the next term, Whether the government is Democratic or Republican, that conflict looks increasingly likely.”
