What can Mexico do if the US gives tax incentives to electric cars?

What can Mexico do if the US gives tax incentives to electric cars?

The US upper house plans to debate and even approve the measure before the end of the year,

What can Mexico do?

If approved, the fiscal stimulus will go into effect until 2027.

For Fernando Ruiz, general director of the Mexican Business Council for Foreign Trade (Comce), the measure goes against the spirit of the Agreement between Mexico, the United States and Canada (T-MEC) and free trade in general.

Mexico can respond by imposing tariffs on electric vehicles, as well as establishing limits on the production or supply of some auto parts that are exported to the United States, said Virginia Ríos, a member of the Faculty of Business at the Universidad Panamericana (UP).

For Mexico, the automotive industry is very important, since it represents almost 4% of gross domestic product (GDP), in addition a quarter of Mexican exports correspond to the automotive industry and is responsible for almost a million direct jobs, plus jobs indirect, the interviewed specialists agreed.

Although there are several alternatives for Mexico, we must be careful with the answer, because “if we put, for example, non-tariff barriers, we are going to complicate the operation of the T-MEC. We have to act seeking to resolve the issue ”, warned Fernando Ruiz.

He added that you have to think about the medium and long term, with great care and great skill “because we can get into trouble in which they (the United States) take another measure from us and fall, as with China, into a trade war.” added.

Exchange currency

It is possible that the United States wants to condition the withdrawal of this measure with its different trading partners. “I don’t know, but it could be. I had not thought about it, but it can always be an option, “said the Comce manager.

In the case of Mexico, it could be used to pressure some points of the electricity reform, proposed by the federal government, which seeks to strengthen the productive companies of the State: Pemex and CFE.

In addition, the country does not provide incentives for consumers to purchase electric vehicles. Light cars, with a capacity of up to 10 passengers, have a deductibility limit of 250,000 pesos. “No electric vehicle in Mexico costs 250,000 pesos. This discourages the purchase of an electric car, “said Ríos from the UP.

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