USTR Raises Concerns Over Chinese Automotive Investment in Mexico

The United States Trade Representative (USTR) has expressed concerns regarding Chinese automotive investment in Mexico, outlined in a recent biannual report under the United States-Mexico-Canada Agreement (USMCA). The report underscores potential impacts on the North American automotive industry and calls for enhanced scrutiny and collaboration among the three nations to address these issues.

“Labor stakeholders have noted that the substantial increase in Section 301 ad valorem tariffs on electric vehicles (EVs) could accelerate investments in EVs outside of China, including in Mexico, to avoid the tax. It may be necessary to take action to address the production of Chinese automakers in other countries,” the USTR document states.

On May 22, 2024, the trade ministers of the United States, Canada, and Mexico agreed to "jointly expand their collaboration on issues related to non-commercial policies and practices of other countries that undermine the Agreement and harm workers in the United States, Canada, and Mexico, including in the automotive and other sectors."

Various commentators, including the United Auto Workers (UAW) and the Labor Advisory Committee (LAC), have expressed concerns about the level of Chinese Foreign Direct Investment (FDI) in Mexico’s automotive sector. They argue that such investment aims to circumvent Section 232 and Section 301 tariffs on direct imports from China. Both organizations have urged the United States to work closely with Canada and Mexico to carefully examine these Chinese investments and determine whether the automotive content entering the North American supply chain is linked to Chinese government-backed firms.

In response to these challenges, the UAW has recommended that the Administration and Congress consider raising the Most-Favored-Nation (MFN) tariff on automobiles and auto parts, with a specific focus on EVs and related components, to mitigate potential imports of Chinese EVs.