China has positioned itself as the main car supplier in Mexico, with exports reaching $4.6 billion in 2023, according to data from Mexico’s Secretariat of Economy.
The Chinese automaker BYD surpassed Honda and Nissan to position itself as the seventh largest automaker in the world by number of units sold during the April to June quarter. This growth was driven by increased demand for its affordable electric vehicles, according to data from automakers and research firm MarkLines.
The company’s new vehicle sales rose 40 percent year over year to 980,000 units in the quarter—the same quarter wherein most major automakers, including Toyota and Volkswagen, experienced a decline in sales. Much of BYD’s growth is attributed to its overseas sales, which nearly tripled in the past year to 105,000 units. Now BYD is considering locating its new auto plant in three Mexican states: Durango, Jalisco, and Nuevo Leon.
Foreign investment would be an economic boost for Mexico. The company has claimed that a plant there would create about 10,000 jobs. A Tesla competitor, BYD markets its Dolphin Mini model in Mexico for about 398,800 pesos—about $21,300 dollars—a little more than half the price of the cheapest Tesla model.
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That tariff-free access is part of the US-Mexico-Canada Agreement (T-MEC), an updated version of the North American Free Trade Agreement that, as of 2018, eliminated tariffs on many products traded between the North American countries. Under the treaty, if a foreign automotive company that manufactures vehicles in Canada or Mexico can demonstrate that the materials used are locally sourced, its products can be exported to the United States virtually duty-free.
MAGA strikes again
USMCA is actually MORE restrictive in regards to imported automotives
Under the treaty, if a foreign automotive company that manufactures vehicles in Canada or Mexico can demonstrate that the materials used are locally sourced, its products can be exported to the United States virtually duty-free.
That does not look particularly restrictive to me.
the total value of the vehicle must come from the country of origin from 62.5% to 75%
The methods by which “total value” are calculated for country of origin leave open the possibility of building out capital with overseas resources and expertise. This has been the end-run around a host of tariff and trade provisions. You do all the hard bits of engineering abroad and then do the raw assembly of parts just on the other side of the border.
USMCA countries become a backdoor that provide for the evasion of a whole host of trade restrictions.
How Chinese firms are using Mexico as a backdoor to the US
Man Wah is one of scores of Chinese companies to relocate to industrial parks in northern Mexico in recent years, to bring production closer to the US market. As well as saving on shipping, their final product is considered completely Mexican - meaning Chinese firms can avoid the US tariffs and sanctions imposed on Chinese goods amid the continuing trade war between the two countries.
As the company’s general manager, Yu Ken Wei, shows me around its vast site, he says the move to Mexico has made economic and logistical sense.
“We hope to triple or even quadruple production here,” he says in perfect Spanish. “The intention here in Mexico is to bring production up to the level of our operation in Vietnam.”
Anywhere the US has friendly trade relations gets this same treatment. Mexico is simply ground zero because of its proximity to the lucrative Texas and California retail centers.
You’re just repeating what I just said.
If you don’t like free trade, don’t make free trade agreements. You’re actually on Team Trump on this one, he’s the one who wanted NAFTA gone. “This is the worst trade deal ever made, maybe ever”
If you don’t like free trade, don’t make free trade agreements.
The conflict is between the ostensible geopolitical tension between the US and China and the domestic hunger for cheap imports that force American trade negotiators to simply look the other way when presented with these giant loopholes.
It isn’t whether we like or don’t like international trade (we clearly love it, as an economic policy). Its the confusion between stated policies (No Chinese Imports! They’re bad for the economy!) and functional policies (Launder these same vehicles through Mexico and they’re good again!)
You’re actually on Team Trump
Its hardly as though Trump is alone in his hostility towards Chinese trade. Biden’s been at least as enthusiastic. But these foreign policy positions are all smoke and mirrors. They’re intended to justify military spending in a looming second Cold War, not economic protectionism that might drive up domestic inflation rates.
