Mexican car industry says proposed U.S. EV tax credit against trade principles

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Mexican car industry says proposed U.S. EV tax credit against trade principles

MEXICO CITY, December 6, Reuters - The top automotive and auto parts industry groups said on Monday a proposed U.S. tax credit for electric vehicles EVs goes against free trade principles, and warned retaliatory tariffs threatened by Mexico's government could spark a trade war.

After 2027, the proposed $12,500 EV tax credit would include $4,500 for EVs built by union workers in the United States. It is included in the Biden administration's sweeping climate and social spending legislation, which is currently being examined by Congress.

Mexican Economy Minister Tatiana Clouthier has said the tax credit is discriminatory, would violate the United States-Mexico-Canada Agreement on trade, and that Mexico is analyzing legal actions in response to tariffs.

According to World Trade Organization rules, the head of the Mexican automotive industry association AMIA argued that Mexico's government could impose tariffs on products imported from the United States that have an equal value to the impact of the EV tax credit on the Mexican industry.

AMIA chief Fausto Cuevas said he pushed for another solution.

This would lead to a trade war. That does not benefit what we are really looking for, which is the regional integration of the industry, he said.

The U.S. Trade Representative's office said on Friday it was committed to legislation strengthening the U.S. EV industry.

In late October, Mexico, along with the European Union, Canada, Japan, France, South Korea, Italy and other countries wrote to the U.S. lawmakers saying the proposed tax credit violates international trade rules.