Possible Purchase Incentives for US-Made Electric Vehicles Alarming USMCA Partners
Although it's not known what sort of electric vehicle purchase incentives might be included in Build Back Better legislation, Canada and Mexico are arguing to congressional leaders that offering larger tax credits for U.S.-assembled electric vehicles hurts both the integrated North American auto industry and undermines the USMCA.
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Canadian Trade Minister Mary Ng wrote on Oct. 22 that "Discriminating against Canadian production is inconsistent with the Canada-United States Joint Action Plan on Critical Minerals Collaboration, particularly given our shared objective to develop a sustainable and secure supply of batteries in North America. For example, Canada is the only country in the Western Hemisphere that has all the critical minerals required to manufacture EV batteries: graphite, nickel, aluminum, copper, lithium, cobalt, manganese, molybdenum and rare earth elements. ... Canadian unions and labour standards are as robust as those in the United States. Therefore, it is imperative that Canadian assembly, including Canadian unionized assembly, is not discriminated against and is eligible for the maximum incentive available under any change to Section 30D. I urge Congress to pass legislation that does not discriminate against Canada, your most trusted and reliable partner."
Ng also argued that "If passed into law, these credits would have a major adverse impact on the future of EV and automotive production in Canada, resulting in the risk of severe economic harm and tens of thousands of job losses in one of Canada’s largest manufacturing sectors. U.S. companies and workers would not be isolated from these impacts.
"Measures that negatively impact Canadian assembly of vehicles will harm the U.S. parts sector and jobs given that each assembled vehicle produced in Canada contains approximately 50% U.S. content. A weaker Canadian automotive sector would also have negative implications for U.S. automotive producers and workers, in particular in the Great Lakes region, who rely on parts and materials from Canada that support production in both countries."
Mexico has not posted its arguments, and the tax writing committees did not share a copy of that letter, sent in September, but published reports say that Economy Minister Tatiana Clouthier complained that after 2026, the credits would only be for vehicles assembled in the U.S., and that a larger credit would be available if the battery was made in the U.S., and at least 50% of the car's components were domestic. “[T]he above provisions are contrary to the regional content value rules agreed upon in the T-MEC, so I respectfully request that these provisions consider including incentives for all North American regional content and assembly in a manner compatible with the treaty," she reportedly wrote, using the Mexican acronym for USMCA.