BYD Searched for Land in Mexico but...
Mexico Hesitates Due to Tariff Bomb Concerns
Donald Trump, the President-elect of the United States, warned that he would impose "tariffs of over 200%" on Chinese cars produced in Mexico, deepening Mexico's dilemma over attracting the Chinese electric vehicle company BYD's factory.
The site of BYD's electric vehicle production base established in Brazil. Photo by Reuters and Yonhap News.
The Wall Street Journal (WSJ) reported on the 26th (local time) that Mexico is facing difficulties in pushing forward with BYD's factory construction due to the potential clash with the Trump administration.
The Mexican government pursued attracting the BYD factory to create jobs. At the end of last year, BYD sought a site near the automotive industrial complexes in northern or central Mexico to build an electric vehicle factory. The Mexican state governments had also completed consultations on environmental regulations, import-export permits, and other matters.
However, concerns about BYD's factory construction grew with the incoming Trump administration. This was because Trump had warned of tariff bombs since his presidential campaign. In September, during a campaign rally in the U.S. Midwest, he repeatedly stated, "If Chinese car companies produce cars in factories set up in Mexico and bring them into the U.S., tariffs of over 200% will be imposed."
In particular, hardliners around Trump who advocate for trade disputes are extremely wary of Chinese goods entering the U.S. through Mexico. In the 1970s, the U.S. automobile industry was pushed back in competition by Japanese companies such as Toyota and Honda, followed in the 1990s by Korean companies like Hyundai and Kia. There is also strong protectionist demand to block Chinese automobile companies from entering the U.S. market.
Since Mexico is highly dependent on the U.S., imposing tariffs would be fatal to the Mexican economy. Last year, 83% of Mexico's exports were destined for the U.S. In this situation, if Mexico builds a BYD factory, it would not only be unable to sell cars to the U.S. but could also provoke Trump's anger.
Trump recently stated that he would sign an executive order imposing a 25% tariff on goods imported from Mexico and Canada.
BYD cannot export electric vehicles produced in its Chinese factories due to the 10% tariff imposed on Chinese electric vehicle imports by the Biden administration starting this year. Considering the anti-China sentiment in the U.S., building a factory there is also not an option.
According to WSJ, BYD's efforts to establish a factory in Mexico have become difficult. Some Mexican states have reduced or canceled local tax breaks and water fee discounts that were proposed to attract BYD's factory.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
