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The Financial Times: The United States has expressed concerns regarding Mexico’s potential influx of Chinese investments, particularly in electric vehicle (EV) manufacturing. Three major Chinese EV companies—MG, BYD, and Chery (referred to as Chirey in Mexico)—are in discussions to establish factories in Mexico. Additionally, another Chinese firm plans to build a $12 billion battery plant there.
This growing Chinese investment in Mexico, a major car-producing nation benefiting from cheaper labor and access to the North American free trade deal (USMCA), places Mexico at the center of the US-China trade tensions. The U.S. is wary of Chinese investments in Mexico, fearing it may be used as a backdoor to the U.S. market, particularly in the electric vehicle sector.
The U.S. has been competing with China in electric vehicle production and has implemented strict policies to limit the influence of Chinese-made EVs and components in its supply chain. There is concern that Chinese manufacturers might circumvent these restrictions by producing in Mexico, offering technologically advanced and competitively priced models.
Chinese EV makers have seen significant growth in Mexico, with their market share rapidly increasing. The U.S. insists it is not trying to block Chinese investments in Mexico but emphasizes the importance of proper trade rule application. This includes a recent agreement with Mexico to enhance foreign investment screening.
Mexico’s economic ties with the U.S. are strong, with a significant portion of its exports going to the U.S., along with substantial remittances from Mexicans living and working in the U.S. This year, Mexico emerged as the U.S.’s largest trading partner. The Biden administration is pushing for more economic integration in North America, especially in green industries, which includes electric vehicles.
However, the U.S. has set certain conditions for EVs to qualify for consumer tax credits under the Inflation Reduction Act, including production in North America and sourcing from countries with U.S. free trade agreements, explicitly excluding China. Chinese companies are aware of the challenges posed by anti-China sentiment in Washington, recognizing the potential barriers to accessing U.S. subsidies for EVs.
The entire article can be read at the link https://www.ft.com/content/fbd270d1-c688-4300-bd4e-f1eee1869196
