The internationally opposed US electric vehicle (EV) tax break was a subject of conversation and tension during the “Three Amigos” summit, the first meeting between all three North American presidents in five years.
Among the various issues discussed by US President Joe Biden, Canadian Prime Minister Justin Trudeau and Mexican President Andrés Manuel López Obrador, one of the most pressing was the US proposed tax incentives for US union-built EV as part of Biden’s “Build Back Better Act.” The US$1.75 trillion Act has been passed by the US House of Representatives and now awaits voting by the US Senate include tax incentives of up to US$12,500 per vehicle to boost demand for EV in the US. International trade partners claim the incentives violate trade agreements such as the USMCA.
During a news conference held in the Mexican embassy, Mexican Minister of Foreign Affairs Marcelo Ebrard and other officials discussed the summit. Ebrard mostly focused on the positive discussions of the meeting, such as a plan for investment in Southeast Mexico and Central America in an attempt to lower migration rates to the US. While Ebrard did not directly mention the discussions regarding EV tax credits, Canadian Prime Minister Trudeau was more open on the subject.
“We underlined to what point this would be a big problem for auto production in Canada,” said Trudeau during a news conference held in the Canadian embassy after the summit. Trudeau says that while no agreement was reached, the US government is very aware of Canada’s concerns and the two governments will continue to communicate over the issue “effectively.”
Mexican Economy Minister Tatiana Clouthier and Canadian Deputy Prime Minister Chrystia Freeland alike have called out the proposal for violating the recently signed USMCA Agreement, with Clouthier saying the proposal should be modified to benefit all North American content and assembly. The proposal has even caused controversy for US auto manufacturers, which have plants in no-union states that would therefore not benefit from the tax credits.
When asked about the proposal by reporters, US President Biden avoided answering questions regarding the inclusion of Mexican and Canadian manufactured EV in the proposal by citing the act’s current status. As US democratic senators struggle to unify behind an act that cannot afford to lose more than few members’ support in order to pass, several provisions are likely to be made. One of those is likely to be the EV tax credit proposal due to its opposition by democratic moderates such as West Virginia Senator Joe Manchin, who called the provision “wrong” after visiting a Toyota plant in his home state.
Opposition to the tax credits within the US may be strong enough to prevent the proposal from being included in the final version of the law. President Biden’s seemingly lack of assurance in the provision’s future as it stands could mean a willingness to modify it.