Tariffs Will Move Chinese Production To Mexico

The Biden administration's new tariffs on Chinese electric vehicles and other strategic sectors aim to protect the future of U.S. manufacturing, but they will likely accelerate a shift of Chinese production to Mexico, Vietnam and elsewhere to avoid them.

U.S. officials and trade experts say that without strong efforts to cut off transshipped or lightly processed Chinese goods from Mexico and other countries, China's underpriced excess production will still find its way into U.S. markets.

"The new tariffs might keep out imports from China but it is likely that much of those imports could be rerouted through countries not subject to the tariffs," said Eswar Prasad, trade policy professor at Cornell University and a former China director at the International Monetary Fund.

Mexico and Vietnam, in particular, have benefited from escalating U.S.-China trade tensions due to their lower costs and proximity, Prasad said, adding that they both need to avoid Washington's "ire" while reaping new manufacturing investments.