Nervous over news of BYD’s Mexican factory
Voices growing louder about “blocking bypass of tariff barriers”
Concerns about Korean companies entering Mexico
As Chinese automobile companies continue to advance into Mexico, the ‘front yard of the United States’, arguments for revising the system to prevent bypass exports are gaining momentum in the United States. The idea is to prevent attempts to bypass tariff barriers in the U.S. mainland by utilizing the North American Tri-State Free Trade Agreement (USMCA).
The Federation of American Manufacturers issued a report on the 23rd (local time), saying, “The entry of cheap Chinese cars into the U.S. could put the U.S. auto industry on the brink of extinction,” adding, “Mass closures of factories and job losses in the U.S. will occur.” “We must close the ‘back door’ of Chinese automobile imports,” he argued. The Federation of American Manufacturers analyzed data from the Economic Policy Institute, a U.S. think tank, and found that among U.S. auto parts imports from 2017 to 2023, imports from China decreased by about 17%, while imports from Mexico increased by 20%. As of last year, Mexico’s share of U.S. auto parts imports amounted to about 38%. When former U.S. President Donald Trump applied Section 301 of the Trade Act in 2018 and 2019 to build a wall imposing a high tariff of 25% on thousands of Chinese products, Chinese companies began ‘diversion exports’ to Mexico, which has low tariffs thanks to USMCA. Meaning. According to the Mexican Automobile Parts Industry Association (INA), the export volume produced by Chinese auto parts companies in Mexico and sold to the United States last year was about $1.08 billion (approximately 1.4 trillion won), an increase of 52% compared to 2021. .
Meanwhile, BYD, China’s largest electric vehicle company, has recently begun a feasibility study to establish a new plant in Mexico, making American companies even more nervous. MG, a brand under Shanghai Automobile, and China’s Chery Motors are also considering establishing new plants in Mexico.
Moreover, Tesla of the United States is also preparing to build a new factory in Mexico and is inviting Chinese parts companies to Mexico. Chinese auto parts companies such as Ningbo Shisheng Group and Sanhua have already announced their intention to enter Mexico. This is an attempt to replicate the cheap parts supply chain of the Tesla factory in Shanghai, China and move it to Mexico.
Korean automakers operating in Mexico, including Kia, are closely watching the situation to see if any sparks will fly. In particular, tensions heightened when former President Trump said last month, “Other countries are building large factories in Mexico and selling cars to the United States with zero tariffs,” and said, “We will bring back the automobile industry.” An automobile industry official expressed concern, saying, “Just as Korean companies were affected by the U.S. Inflation Reduction Act (IRA) targeting China, the same thing should not happen in Mexico.”
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.