Summary
- The former President wants Chinese automakers to build plants in the United States instead of Mexico
- Trump claims Mexico has taken 31% of the U.S. auto manufacturing business
- Biden’s 2022 Inflation Reduction Act gives U.S. companies tax rebates for battery production and EV purchases
- The Federal Government is increasing tariffs to prevent China from cornering the supply chain for EV and hybrid parts
- Chinese automakers could significantly influence the U.S. EV market by establishing local production
In an interesting twist, Donald Trump, despite his well-known skepticism towards electric vehicles (EVs), wants Chinese EV manufacturers to establish their plants in the United States instead of Mexico. Trump’s appeal comes as part of his broader strategy to boost American manufacturing and job creation.
By inviting Chinese automakers to build in the U.S., Trump aims to strengthen the domestic economy and reduce dependency on foreign manufacturing, even as he maintains his critical stance on the electric vehicle industry. This move underscores the complex interplay between economic nationalism and the evolving global automotive landscape that could influence consumer decisions in America for the next 3 to 5 years.
In a recent interview with Businessweek magazine, U.S. presidential candidate Donald Trump criticized the entry of Chinese investment in the automotive sector in Mexico. The former president accused the Chinese automotive industry of implementing manufacturing and assembly plants in Mexico to sell vehicles in the United States, with the benefits of paying less taxes due to the US-Mexico-Canada Agreement (USMCA).
“You know, a bad thing’s happening. A really bad thing is happening there in Mexico. China is building massive automobile plants. They’re gonna put the UAW out of work. They’re building them in Mexico to build cars to sell into the United States; what do we get out of it?” Trump told Bloomberg Businessweek.
Credit Bloomberg
In addition, the now-official Republican nominee noted that under the Joe Biden administration, companies have opted to go to Mexico under nearshoring instead of moving to the United States, paying more taxes and generating more jobs.
Last week at the Republican National Convention, Trump reiterated his view by saying, “Right now, as we speak, large factories just are being built across the border in Mexico” by China to make cars to sell in the U.S. Those plants are going to be built in the United States, and our people are going to man those plants.” Those comments come as a surprise, considering he has bashed EVs, saying, “they don’t work in the cold. They don’t work in the heat. There’s a lot of problems.”
In April, Donald Trump told Time magazine, “I will tariff them at 100%. Because I’m not going to allow them to steal the rest of our business. You know, Mexico has taken 31% of our auto manufacturing business.” Still, companies eager to bring Chinese EVs to the U.S. market would likely challenge any government measures that impede imports.
Although EVs no longer dominate global auto sales statistics, they’re still considered the future of a sector that accounts for approximately 4.8% of the U.S. economy.
Credit The New York Times
The EV Landscape In The U.S. With Biden
Under the Biden administration, tariffs on EVs were drastically increased to 102.5 percent, compared to the 27.5 percent set by Trump. Likewise, in the Trump Administration, the White House “raised trade tensions with China, imposing high tariffs on its goods.”
During Biden’s term, the country designed an ambitious plan to migrate to electric mobility technologies supplied by renewable energy sources or cleaner than hydrocarbons under Biden’s adminstration. In addition, the trade war with Asian countries escalated.
The Inflation Reduction Act, which Biden enacted in August 2022, was widely praised by environmental groups for its innovative industrial policies. Tax credits to subsidize battery production and encourage EV purchases were made available to U.S. firms as a result of the Act. These companies included Tesla, General Motors, and Ford.
Foreign automakers are also welcome to apply if they establish a presence in North America. Several manufacturers, including Toyota and Honda of Japan and Volkswagen, Mercedes-Benz, and BMW of Germany, announced plans to invest in North American EV and battery production within months after Biden’s signature.
Although the law successfully increased the production of electric vehicles and batteries, the demand for these vehicles has not increased at the same rate.
Potential Implications Of Trump’s Plans
The rise of Japanese automakers in the 1980s serves as a historical precedent. Their success, achieved partly by building factories in the U.S., highlights the potential impact of Chinese carmakers replicating this strategy with electric vehicles.
Decades ago, Japanese car brands revolutionized the U.S. car market. They introduced efficient production methods that maximized output and produced highly reliable cars, propelling their dominance. Today, Toyota and Honda remain top sellers in several categories.
Similarly, Chinese automakers could significantly influence the U.S. EV market by establishing local production. Their expertise in building and commercializing EVs is undeniable. China’s early investment, government support, focus on the entire supply chain, and solid domestic battery industry have made them the global leader in battery processing and refining. This expertise, combined with U.S. manufacturing capabilities, could be a game-changer.
In this regard, the Federal Government announced in May 2024 increased tariffs on Chinese batteries and EVs. The rationale is to prevent China from cornering the supply chain for EV and hybrid parts and promote local and friendly national economies.
Conclusion
The global EV industry approaches a tipping point as North America and Europe compete with Asia. In 2023, Tesla had the largest market share, but Chinese automaker BYD Auto was very close behind. Current trends suggest that BYD Auto will capture the top spot and give Tesla some competition thanks to its active overseas drive. This panorama raises the question of whether or not greenlighting Chinese EV automakers could benefit the U.S. auto industry and the overall economy.
Still, one thing is sure: homegrown brands will be forced to bring their A-game to compete with Chinese EV automakers, benefiting prospective EV owners. This “EV war” between the United States and China will most likely result in the broader offer of higher-quality electric vehicles on American soil and lower EV prices, thus further accelerating EV adoption in the U.S.
