In the context of increasing trade tensions, former President Donald Trump – the Republican Party’s presidential candidate for 2024 – has taken a strong stance against the Chinese auto industry.
Speaking at a campaign rally in Ohio over the weekend, Trump said that Chinese companies are building “giant car manufacturing plants” in Mexico and they think they can sell cars to the US without creating jobs for Americans.
He warned that if elected president, he will “impose a 100% tax on every car that crosses the border.” This tax will be applied if Chinese automakers deliberately set up factories in Mexico to avoid the tariffs he had previously imposed. During his presidency, Trump established a 25% tariff on cars produced in China.
Earlier this month, Trump threatened to impose a 50% tariff on Chinese cars. He also proposed a tariff of up to 60% on all goods from China and 10% on goods produced anywhere in the world.
Trump’s warning comes as the current administration of President Joe Biden has stepped up controls on Chinese cars, citing the protection of Americans’ privacy rights.
Former President Trump emphasized the importance of re-election for himself and the country, warning of the risk of a “bloodbath” for the auto industry if he does not win the US presidential election this year.
In the meantime, Chinese automakers are seeking to expand into new markets to cope with the economic downturn at home. Setting up factories in Mexico is seen as one of the potential solutions, providing a backdoor for China to penetrate the US market.
Mexico has the advantage of being close to the US, relatively low labor costs, and the opportunity to take advantage of low or zero tariffs on vehicles produced in Mexico.
The auto industry has become the third largest FDI attraction sector that China has invested in Mexico, behind computer equipment (609 million USD) and energy (410 million USD).
The surge of FDI capital inflows is due to the increasing number of Chinese automakers such as BYD, Changan, Omoda, Jetour, GWM Motors, and Geely Autos showing interest and investing in building factories in Mexico.
These companies are following the trend of shifting production chains to the second largest economy in Latin America to take advantage of its proximity to the US – a major consumer center as well as a large production center in the world.
China’s largest automaker BYD recently announced plans to invest in building an electric car manufacturing plant in Mexico to establish an export center for cars to the US.
However, with the proposed new tariffs, the challenges for them are becoming increasingly greater, indicating that the trade war between the US and China may continue to escalate.
Reference: Carscoops
