Mexico has become a battleground in the China-U.S. trade war as Chinese automakers have set up shop there to avoid import tariffs
- Chinese and American automakers are moving factories to Mexico to avoid import tariffs.
- While the Mexican economy is benefiting, the country is in a risky position between the not-so-friendly superpowers.
- As the rhetoric surrounding Chinese products like electric vehicles moves to national security issues, the stakes only increase.
The U.S. government has been pondering for months how to stop Chinese companies from avoiding tariffs by building electric vehicles in Mexico. This means walking a tightrope for America’s southern neighbor, as it becomes a battlefield in the trade war between the superpowers.
Products made in China are subject to high import costs when attempting to enter the U.S. market. A tariff of 27.5 percent applies to electric vehicles, making electric vehicles made in China no longer competitive. That’s why automakers like BYD are trying to build plants in Mexico, where there are favorable trade agreements with the United States
Read: Mexico ends incentives for Chinese automakers after US pressure
However, automakers are not the only Chinese companies looking to gain a foothold in Mexico, the BBC reports. The term is called “near shoring,” and it means that companies like Man Wah, a furniture maker that supplies sofas to companies like Costco, have set up shop south of the U.S. border.
Although the companies are Chinese, the products they produce are Mexican, meaning they can avoid the tariffs. And China isn’t the only country on the verge of shoring. American companies are also moving some of their factories from Asia to Mexico.
According to Enrique Dussel of the Center for China-Mexico Studies at the National Autonomous University of Mexico, while nearshoring is a clear advantage for the Mexican economy, it is also dangerous for the country.
“Under previous governments and this one – [Mexico] “I have no strategy towards this new love triangle,” Dussel told the BBC. “Mexico puts up a big sign on China that says “Welcome to Mexico!” You don’t need a doctorate to know that this will not end well for U.S.-Mexico bilateral relations in the medium term.”
In fact, the Latin American country has taken the first steps to appease its northern neighbor. The federal government has reportedly stopped offering incentives to Chinese automakers wanting to set up plants there.
This followed US President Joe Biden’s announcement that Chinese electric vehicles pose a threat to US national security. According to Dussel, Mexico must be careful not to end up in the middle of the superpowers when discussing national security issues, especially with upcoming elections looming on both sides of the American border.
