Mexican government officials have reportedly halted meetings with Chinese carmakers in an effort to avoid upsetting the United States. American politicians are concerned that China is using Mexico as a way to bypass high import tariffs and gain cheap access to the US market. Talks of further investment have been put on hold due to pressure from American officials. Mexico has previously granted land and tax incentives to Chinese automakers, but it seems that they are now being cautious about their relationship with China.
The Office of the United States Trade Representative (USTR) is said to be behind Mexico’s decision to pause talks with Chinese carmakers. The USTR states that the United States-Mexico-Canada Agreement (USMCA) should not provide a “back door” for China or other countries to access the US market without paying tariffs. The Biden administration is also concerned about Chinese automakers flooding the market with vehicles that could pose a threat to national security.
Mexico has long been a manufacturing hub for American automakers and suppliers, such as GM, Ford, and Stellantis. There are also assembly plants owned by Japanese and German automakers in the country. With Chinese carmakers now entering the Mexican market, the US government is becoming more involved. China has been making significant investments in Mexico’s automotive sector with the goal of establishing a presence in a country that plays a crucial role in supplying cars to the US market.
The Biden administration is attempting to influence Mexico’s decision to develop a closer relationship with China. The USMCA is set for revision in 2026, and Mexican officials are concerned that the US could propose unfavorable trade terms if China becomes a key player in North American EV production. Despite pressure from the US, Chinese automakers have already made progress in the Mexican market. Around 20 Chinese brands, including BYD, JAC, MG, and Chery, are gaining popularity in Mexico with their cheap cars and proposals for future EV production.
Chinese cars now make up about a third of the total brand offerings in Mexico, marking a shift away from traditional brands like Volkswagen and Toyota. Mexican buyers are increasingly opting for alternatives from Chinese automakers due to their affordability. While these cars may not make it to the US market, Chinese automakers could still tap into it through production partnerships. For example, BYD has previously worked with Tesla in China to supply batteries. It’s possible that Chinese automakers could do the same with other automakers and contribute to US-bound EVs with batteries made in Mexico, thereby avoiding tariffs.
The US is closely monitoring its interests in Mexico and warning its neighbor to consider its new relationships. The fear is that China’s presence in Mexico’s automotive sector could have implications for the US market and national security. The US government is keen to protect its own automotive industry and ensure fair trade practices within the North American region. As the USMCA comes up for revision, the future of Mexico’s relationship with China and the US remains uncertain.