Interesting economic news out of Mexico.
(Paywall)
"Is Mexico responding to U.S. pressure—or maybe to threats from Donald Trump—against Chinese electric-vehicle manufacturing south of the border? That’s the takeaway from a Reuters
report Friday citing unnamed Mexican officials who say that Mexico is halting its practice of giving incentives to vehicle manufacturers and “putting on pause any future meetings with Chinese automakers.”
If Mexico pulls back on subsidies designed to woo Chinese investment in EVs, it may provide a little goodwill on the country’s balance sheet with the U.S. But it’s unlikely to satisfy powerful American steel, aluminum and auto interests lobbying for greater barriers to free trade in this election year. While Mexico has the attention of the U.S. press, the real spat is about the World Trade Organization and the protectionist catchall “national security.”
American politicians on both sides of the aisle seem eager to conflate Chinese EV production in Mexico with the U.S.-Mexico-Canada Agreement, or USMCA. The idea is to denounce anything made in Mexico, as if the U.S.’s southern neighbor and one of its largest trading partners is an enemy.
This is a sop to Big Labor and to the grievance brigades in swing states who pine for the protectionism of the 1980s. It’s also dishonest and dangerous and threatens to drag the U.S. economy back into the destructive 1930s era of the Smoot-Hawley tariff.
In February Nikkei reported that Chinese EV manufacturer BYD was
scoping out options for a plant in Mexico. At a March rally in Ohio Mr. Trump took aim at the news.
“Mexico has taken, over a period of 30 years, 34% of the automobile manufacturing in our country,” he said. “Think of it. It went to Mexico. China now is building a couple of massive plants where they’re going to build the cars in Mexico and . . . they think that they’re going to sell those cars into the United States with no tax at the border.”
"
Mr. Trump says he’s
ready to make it 100% on China cars made in Mexico. The Commerce Department has launched an investigation into what it calls the “national security risks of connected vehicles, specifically PRC-manufactured technology in the vehicles.” In following up on the news from Mexico last week, Reuters reported that “a White House spokesperson said [President Biden] will not let Chinese automakers flood the market with vehicles that pose a threat to national security.”
I don’t know about you, but I can think of a lot of ways that China can spy on the U.S. and a car, which is today a computer on wheels, is hardly required. This is raw protectionism. It’s bad for the innovation and competition that is good for Americans and none of it has anything to do with the USMCA."
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Make Americans Poorer Again (MAPA)
