Agencies
WASHINGTON
The potential influx of low-priced Chinese electric vehicles (EVs) into the US market via Mexico is causing concern among American automakers.
This scenario could disrupt the domestic EV market, where homegrown EVs, averaging $55,000, would struggle to compete against their significantly cheaper Chinese counterparts.
Chinese automakers could leverage North American trade rules to set up production in Mexico and export their EVs to the US at minimal tariffs, potentially as low as 2.5 percent. This possibility has sparked fears of a repeat of the devastating impact that subsidized Chinese products had on American industries like steel and solar equipment.
“Time and again, we have seen the Chinese government dump highly subsidized goods into markets for the purpose of undermining domestic manufacturing,’’ Sen. Sherrod Brown, an Ohio Democrat, wrote in an April letter to President Joe Biden that called for an outright ban on Chinese electric vehicles in the US. “We cannot let the same occur when it comes to EVs.’’
The Alliance for American Manufacturing has echoed these concerns, warning that an influx of low-priced Chinese EVs could be an “extinction-level event” for the American auto industry.
The US-Mexico-Canada Agreement (USMCA), enacted in 2020, could facilitate this scenario. The agreement allows vehicles assembled in Mexico to enter the US either duty-free or at a nominal tariff, provided they meet certain North American content requirements. This could enable Chinese automakers to significantly undercut US prices.
The US has several options to mitigate this threat. Customs officials could rule that Chinese EVs assembled in Mexico don’t qualify for USMCA benefits, or policymakers could pressure Mexico to exclude Chinese vehicles. Another approach could involve barring Chinese EVs on national security grounds, given concerns about data collection and potential remote access capabilities.
Former President Donald Trump suggested imposing a 100 percent tariff on Chinese EVs to protect the American market. However, any measures taken by the US government will likely face legal challenges from companies wanting to importChinese EVs.
The threat from Chinese EVs comes when US automakers are already facing challenges in the EV market, including slowing sales and high production costs. Despite federal tax incentives, high prices and a scarcity of charging stations have hindered EV adoption in the US.
Some experts argue that allowing low-priced Chinese EVs into the US could accelerate EV adoption and drive down prices. Christine McDaniel, a senior research fellow at George Mason University’s Mercatus Center, suggested that market competition could benefit consumers, even if it disrupts the industry.
China currently leads the global EV market, producing nearly 62 percent of the world’s battery-powered EVs last year. In contrast, the US produced less than 10 percent, according to GlobalData.
Chinese automakers like BYD have achieved significant cost efficiencies through government subsidies, enabling them to offer models like the Seagull for as low as $12,000 in China.
The Biden administration has already increased tariffs on Chinese EVs to 102.5 percent, aiming to price them out of the US market. The European Union has also announced plans to impose tariffs onChinese EVs.
