The Mexican federal government has decided to cease offering incentives to automakers from China, a move attributed to mounting pressure from the United States. This decision has raised concerns about potential efforts to bypass tariffs.
According to undisclosed sources, at a recent meeting between high-ranking Mexican officials and representatives from Chinese automaker BYD, Mexico communicated that it would no longer provide incentives and would suspend all future engagements with Chinese automakers.
The development follows actions by the Office of the United States Trade Representative aimed at restricting Chinese automakers from accessing the North American free trade zone. The U.S. has emphasized that the United States-Mexico-Canada Agreement (USMCA) was not designed to serve as a loophole for Chinese automakers to avoid tariffs.
Chinese automakers, backed by government subsidies, have been eager to expand into new markets, including North America. However, they have faced challenges, such as the 27.5 percent import tariff imposed by the U.S. American industry representatives, including Senator Marco Rubio, have advocated for additional measures to deter Chinese automakers.
Mexico has historically been enticing for foreign automakers, offering incentives like free land, water, and energy. With the cessation of federal incentives, Chinese automakers may seek support from state governments.
For instance, BYD is reportedly exploring assistance from states like Nuevo Leon, which previously attracted Tesla by offering $153 million in incentives.
While the entry of Chinese automakers could potentially benefit the Mexican economy, officials are exercising caution to avoid upsetting the U.S., especially with the upcoming revision of the USMCA in 2026.
