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The Biden administration’s proposal to offer tax credits to people who buy electric vehicles assembled in the United States is running into rough weather. Not from the Republican Party but from two of America’s neighbours— Canada and Mexico.
President Biden hosted Prime Minister Justin Trudeau of Canada and President Andrés Manuel López Obrador of Mexico at the White House on Thursday. On the outside, it seemed everything was fine and Biden spoke of the bonhomie among the three countries without touching the topic that has Mexico and Canada worried. (https://www.usnews.com/news/business/articles/2021-11-18/differences-endure-as-biden-brings-back-north-america-summit)
Before this summit, the Canadian government warned the U.S. Congressional leaders on the proposed tax credits. It has argued in a letter that EV production in Canada would be hit if the U.S. moved ahead with its proposal.
Biden’s $1.75 trillion social spending and climate bill currently being debated in the Congress proposes to allocate up to $12,500 in incentives for U.S-made electric vehicles, including a $4,500 credit for union-made cars and trucks. (https://www.eenews.net/articles/canada-mexico-to-challenge-bidens-ev-tax-boost/)
As the motor vehicle-related industry works in close coordination in North America, with various vehicle parts being manufactured in all three countries, Mexico and Canada fear their manufacturers could lose a competitive edge if the U.S. starts offering huge subsidies. Even a congressional report describes the close integration. (https://crsreports.congress.gov/product/pdf/IF/IF11387)
Trudeau had said days before the summit, Biden administration’s move on tax credit was “counterproductive”, but White House insisted that it was in the interest of American consumers. (https://www.nytimes.com/2021/11/18/us/politics/us-canada-mexico-summit.html)
A lot of back-channel diplomacy is likely to take place over the issue.
Read more:
Canada has been vocal for some time on the tax credit issue:
https://www.reuters.com/world/americas/canada-criticizes-proposed-us-ev-tax-credit-says-could-harm-auto-sector-2021-10-22/