Greetings from Washington, your brave trade reporter is very happy to return from a short visit to the UK. The Dulles team is as heartbreaking as ever, but it seems to move faster than usual. Perhaps the U.S. Customs and Border Patrol agents felt the sheer joy of us Brits and various other Europeans being allowed to travel freely again, and let us pass a lighter than usual barbecue.

Speaking of borders, our notes today are about more trade frictions with Canada and Mexico, and we believe this friction is about to escalate.

Concession waters View statistics on how Brexit affects trade between the UK and the EU.

Subsidies have deteriorated relations with U.S. neighbors

we have already Written before Regarding the ongoing trade dispute between the United States and Canada. Despite Joe Biden’s attempts to collaborate into a new era, there are still tensions in commodities such as cheese, wood and solar panels.

Mexico has also encountered some difficulties Energy reform And some frictions in the implementation of the labor provisions of the USMCA trade agreement in Latin American countries.

A new trade war is now brewing, in which Canada and Mexico unite against the United States. This is about Biden’s plan to provide incentives for electric vehicle manufacturing.

In a new proposal that is partly industrial policy and partly to make the United States greener and cleaner, Biden has developed new tax credits designed to help people afford electric cars. In the first five years after the enactment of the bill, buyers of electric vehicles will receive a credit of US$7,500, regardless of where the vehicle is manufactured. But for five years after that, the credit only applies to cars made in the United States. In addition, any car equipped with American-made batteries can enjoy a tax credit of US$500, and if the car is produced in a unionized factory, it can enjoy a tax credit of US$4,500.

Unsurprisingly, Canada does not have a deep impression of this, nor does Mexico. Both believe that the proposed measures are actually more of Biden’s “buy American” sentiment, but this time it applies to the North American automotive supply chain. Canadian Trade Minister Mary Ng believes that it will encourage car companies to build new electric car battery plants in the United States instead of Canada. Ng even wrote to senior U.S. senators and officials complaining that tax credits could “undermine decades” of Canadian-U.S. auto cooperation, leading to the loss of tens of thousands of Canadian jobs and causing additional harm to American workers.

At the same time, Canadian Minister of Innovation and Industry François-Philippe Champagne said last Thursday that Canada will respond to these credits “appropriately”, which sounds ominous to us. “They understand that such legislation will cause a reaction from Canada,” Champagne said in a statement. Interviewed by Reuters“We have been responding appropriately to these types of legislation.” At the same time, Roberto Velasco Alvarez, Mexico’s top trade official in charge of North America, also stated that he is working “Very concerned” Regarding the impact of the proposal on the Mexican automotive industry.

This puts Biden in a tricky position. As we all know, the North American automotive supply chain is integrated. This will not stop when it turns green. Canada has abundant minerals needed to make electric car batteries, such as lithium, graphite, and cobalt. These minerals are useful mineral sources imported into the United States from countries other than China (or Congo, where child labor problems are known).Yes used). In terms of minerals required for electric vehicles, the United States is unlikely to be self-reliant, and Canada will become an increasingly important supplier. It is unwise to establish too many hostile relations with Ottawa in the manufacture of electric vehicles (or the wider auto trade).

On the other hand, these tax credits are the core principles of Biden’s new green industry policy efforts, and he cannot give up. In addition, it is consistent with the statement that American workers are provided with American employment opportunities. As Ted Alden of the Committee on Foreign Relations points out, “If you can get into the swing states of the Midwest and say,’Look, the transition to electric vehicles once again provides you with good factory jobs.’ This is a political thing. Big event. “.

So what should I do now? Then, Canada and Mexico are likely to file a dispute under the USMCA mechanism. But it is difficult to see what is a satisfactory solution unless the part about cars that need to be made in the United States is deleted and replaced with “in North America.” We suspect this may be another interesting trade issue that Trade Representative Katherine Tai (Katherine Tai) is trying to solve without disrupting the political balance. We will watch.

Concession waters

Our chief economic commentator, Martin Wolf, wrote his latest column on how Brexit-especially London’s threat to reject its agreement with the European Union-could harm Britain and Europe Trade relations with foreign countries.

However, in the chartered waters today, we are concerned with evidence of how it affects the relationship with the EU, its largest trading partner.

The following chart clearly shows the impact. In the past three months, UK exports to the EU have fallen by nearly 10% compared to the fourth quarter of 2020. There is no evidence that the break with the EU is affecting relations with the EU. In the rest of the world, commodity exports are now more or less the same as at the end of last year. Claire Jones

Trade ties

Foreign Affairs ($) Yes Interesting works exist The Enlightenment of China’s Shock to Green Economy. Biden’s business executive Gina Raimundo already Said (Bloomberg, $) and U.K with Japan Exceed steel About to start.

Europe’s largest chip manufacturer Infineon Profit almost doubled In the three months to the end of September, benefited from semiconductor In the context of global shortages.At the same time, in the coup of Tokyo’s economic security planners, Sony Signed an agreement (Nikkei, $) and TSMC Joint construction and operation of a US$7 billion chip factory in Japan. Other Asian chip manufacturers—— Samsung, Renesas, SK Hynix with Kioxia – Have obey The United States requires data (excluding customer information) to help identify Supply chain vulnerabilities. Amy Williams, Francesca Regalado and Claire Jones