China's JAC to build cars in Mexico as Trump threat weighs on US carmakers
A worker transports car chassis at the Volkswagen plant in Puebla March 9, 2015 Reuters

China is making inroads into Mexico after US President Donald Trump threatened American automakers to stay away from the country. The Mexican government has said china's state-owned automaker JAC Motors will start manufacturing cars in the central Mexican state of Hidalgo in March.

The announcement came at a time when analysts have said overly protectionist trade and business policies of Trump will lead to the US vacating position of influence in most parts of the world, leaving China to fill the vacuum.

Trump had warned US automakers Ford and General Motors against manufacturing small cars in Mexico and then import them to the American markets, ostensibly on the ground that the big automakers were exporting jobs overseas.

US automakers have already spent billions of dollars in Mexico, building plants in several cities and helping Mexico emerge as one of the biggest auto manufacturing hubs in the world after Japan, Germany and South Korea.

US automakers, and Mexican authorities as well, faced down losses and stiff business challenges after Trump started keenly following up on his radical campaign promises. Within days of assuming office Trump signed an executive order providing for the building of a wall on the Mexican border. His administration followed it up saying the cost of the wall will be recovered through a 20 percent tax on imports from Mexico.

In a move that reflects the current chaos, China has grabbed the opportunity by sealing a deal with Mexico. Omar Fayad, Hidalgo Governor, said the Chinese firm JAC will invest $212 million in Mexico's Giant Motors Latinoamerica to build its SUVs locally.

Mexico's Minister of Economy, Ildefonso Guajardo, stressed the fact that the tie-up came at a time when Mexico was trying to balance its foreign investment in the face of hostile trade policies followed by the US.

According to the Mexican Automotive Industry Association, the country manufactured 3.5 million light vehicles in 2016, a 67 percent rise from 2008. A survey conducted among participants at the high level Automotive Logistics conference in Mexico City this week showed 63 percent of them thought Trump's trade policy would have a negative impact on the booming car manufacturing sector in Mexico.

On the other hand, the vigorous growth in Mexican car industry has caused a widening of the US-Mexico trade imbalance. In 2015, the US had a $67-billion trade deficit with Mexico in cars and car parts, the National Association of Manufacturers said.

JAC Motors