Transshipments are 'big question' for Biden's EV policy, economist says

So the big question here is what are, what is the US going to do about transshipment because 100% tariff is really prohibitive, 25% is probably not. I think some Chinese car makers are already selling at larger per unit losses than that. But at 100% you're not going to be able to sell cars to the to the US if the US also bars transshipment. In other words, we've heard a lot of attention paid to China getting ready to produce in Mexico. They're not producing a lot in Mexico, but at 100% tariff they would produce in Mexico if allowed. Are those cars going to be able to cross the border, China make Chinese made cars in Mexico at a much lower tariff, China's going to produce in Europe. Are those cars going to be able to enter the US at a much lower tariff? So if there's transshipment barriers, then you're going to get a very serious Chinese response. And then the US is basically saying this industry you poured money into, you're not going to be able to sell anything into the United States without the transshipment barriers. The Chinese will complain, but they won't do anything. That's the key thing to watch for when these are announced because it's going to tell us what the Chinese response is. So that's the back door, isn't it? Senate Banking Committee Chairman Sherrod Brown wants the Biden administration to ban Chinese EVs outright. That will effectively ensure there's no access through the back door through Mexico. Is it going to go that far, Derek? I don't think it's going to go that far at the beginning. As I said, you know, it's may of an election year and this could have been done a long time ago. the US doesn't import Chinese EVs as you mentioned the outset yet. So the timing of this does not look like we have a sudden economic need or the Biden administration wants to put its stamp on on tariffs. The timing looks like we're going to, as you said, outdo Trump. And that's going to be about 100% is bigger than anything you did. And it's not necessarily going to be about a ban or transshipment limits at the outset. So I don't think Senator Brown's going to get what he wants right away, and I don't think we're going to have an intense Chinese reaction right away. But of course this opens the door to all these things happening, you know, later this year, Derek, you know this whole phenomenon of, as you refer to it, transship. And I think of it more sort of a end run, right? Could be a Chinese autos back door through Mexico. BYD is there. We know already it's already happening through Venezuela. And I mean one of the ironic things is it's actually narrowed the US trade deficit with China. Although the the US deficit with all these other countries including Venezuela, Mexico, etcetera, they're actually at at record, record highs. Which begs the question some people said maybe the only way to stop this and run is for basically to to to ring fence things and just slap a 10% across the board a tariff on anything that comes into the US Is that is that extreme. I I do think it's extreme. I also don't think it would work. The Chinese can can over subsidized and over produce any 10% tariff. So all you're doing is punishing everybody else. You're not stopping China's Enron or transshipment or you know foreign investment in other countries to to sell to the US with a 10% tariff. All you're doing is hitting everybody else who sells closer to market prices. So I I do think that would be a a harmful to global trade obviously, and it wouldn't get the job done on China. If you want to stop Chinese goods, the thing to do as as we discussed is just say it doesn't matter where they're made. I don't care if it's a 49% Chinese venture, you're still benefiting from government subsidies, unfair trade practices, possible IP theft in the past. You can't sell to the US or you face 100% tariff, whichever you want to go. Quantitative or price restrictions. Even if you make them in Germany or in a in the US FTA partner, that would be a much smarter, more targeted, more effective move than a 10% across the board tariff.