The Chinese automaker BYD is setting up shop in Mexico. Let’s discuss the ramifications.
The American Journal of Transportation reports BYD Mexico Plant Will Create 10,000 Jobs.
BYD Co.’s plans to build a plant in Mexico will create around 10,000 jobs, which would put it in line with some of the largest auto factories in the country.
The electric vehicle giant is in final negotiations for the location of the facility, with an official announcement expected in the coming months, Jorge Vallejo, BYD’s general director in Mexico, said in an interview Tuesday. He didn’t say how many of those workers would be directly employed by BYD versus contractors or suppliers.
A plant of that size would employ more people than facilities for some other carmakers in the country, like Audi. Volkswagen’s Puebla plant — the largest in the country — employs 6,100 assembly line workers and 5,000 supervisory employees, along with thousands of people that handle parts assembly.
The carmarker is on pace to sell 50,000 units in the country this year, Vallejo said. Last month, BYD launched its Shark hybrid truck in Mexico, just another sign of the country’s growing importance to the company.
Biden’s 102 Percent Tariffs Intensify Fight With Trump
Despite extremely low Chinese vehicle imports, Biden placed a 102.5% on Chinese EVs, Intensifying Trade Fight With Trump.
One day after news broke that President Biden was planning to raise tariffs on Chinese electric vehicles to roughly 100%, Donald Trump moved to one-up his rival for the White House.
“I will put a 200% tax on every car that comes in from those plants,” the former president said at a rally in New Jersey on Saturday, referring to Chinese vehicles manufactured in Mexico. Biden, he suggested, was ripping off his tariff-focused trade agenda. “Biden finally listened to me,” Trump said. “He’s about four years late.”
The White House said the new tariffs would apply to $18 billion in products from China, with EV batteries, critical minerals and medical products among the other goods targeted. The tariff rate for Chinese semiconductors would double by 2025—to 50% from 25%.
Biden’s decision caps years of tortured debate within the administration over the tariffs Trump originally put in place on more than $300 billion in imports from China. Those duties, implemented in 2018 and 2019 and augmented by Biden’s new steps, are now a seemingly permanent feature of U.S. policy toward China.
“These tariffs are the culmination of clashing industrial policies between the two countries and also the looming election season in the U.S.,” said Eswar Prasad, a senior fellow at the Brookings Institution.
No Benefit to US Consumers
Biden has put such huge tariffs on Chinese imports that few if any of these cars and trucks will make it to the US. Trump promises even higher tariffs.
Amusingly, it appears Trump will throw his much ballyhooed NAFTA replacement known as USMCA into the ash can.
USMCA was not the success Trump claimed. If anything, it made matters worse.
EU Tariff Comparison
The EU’s tariffs are modest in comparison. They have proposed 38.1 percent tariffs on imported Chinese EVs starting July 4.
But EU-China discussions are underway so the proposal is not yet final.
The Inflation Reduction Act Will Bite Again
The IRA mandates production in the US and on an escalating scale, for batteries, minerals , and parts to be made in the US.
Also recall, UAW workers at GM and Ford won mammoth wage and benefits contracts.
US Auto Exports
Add it all up and the US will be the global leader in cost. So Mexico will likely export the units Mexicans don’t buy to Europe and South America.
So I am wondering …
What other countries will want to buy our cars? How many US consumers will be able to afford them?
Country-specific auto export data is very stale, dating to 2022, ancient history for China and Germany.
BYD Unveils the “Shark” a Plug-in Hybrid Pickup Truck Built in Mexico
On May 14, I noted BYD Unveils the “Shark” a Plug-in Hybrid Pickup Truck Built in Mexico
The Chinese automaker BYD (Build Your Dreams) announces a 700-mile range PHEV that will be built in Mexico, this year.
We now see that this will bring 10,000 jobs to Mexico, none to the US. And Mexico will produce cars for exports eating into US exports.
Highest Cost Producer
Trump and Biden both insist that US consumer pay the highest prices in the world for cars, and we will.
Silliness like this is why I believe any fall in the rate of inflation will be transitory.
Trump’s Plan to Replace the Income Tax with Tariffs is Economic Nonsense
In response to protective tariffs, US manufacturers will increase prices. This is what they have done historically and there is no reason to think the same won’t happen again.
Other countries will retaliate.
The slowdown in overall trade and the accompanying global recession easily may result in a net decline in income.
On June 21, I commented Trump’s Plan to Replace the Income Tax with Tariffs is Economic Nonsense
Mother of All Stagflations
“This is a prescription for the mother of all stagflations,” Summers said on Bloomberg Television’s Wall Street Week with David Westin in regard to replacing a major amount of income-tax revenue with tariffs. It would also create “worldwide economic warfare.”
I don’t often agree with Larry Summers, but that is my take as well.
76 Percent of Those Under Age 40 Would Consider a China-Model Car
On June 14, I commented 76 Percent of Those Under Age 40 Would Consider a China-Model Car
Despite privacy concerns, a huge majority of young adults would buy a car from a Chinese auto company. Biden wants to stop them. [So does Trump].
At the risk of sinking the global economy, Trump and Biden are in an escalating tariff war with each other.
And Trump fails to understand trade basics. Foreign companies don’t pay tariffs. Either US consumers pay them, US importers eat the costs, or some combination.
In practice, history shows the bulk of the cost is born by US consumers.
Trump needs to be prepared for this question in the debate. I expect he will blow it.