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A US manufacturing advocacy group has urged the government to block the import of low-cost Chinese autos and auto parts from Mexico, citing significant risks to the American automotive industry.

The Alliance for American Manufacturing highlighted the potential for “an extinction-level event for the US auto sector” due to the competitive advantage these imports have, backed by substantial Chinese government support. Their report calls for action to prevent these vehicles and components, produced by China-headquartered companies in Mexico, from enjoying the benefits of the North American free trade agreement, aiming to protect US jobs and manufacturing plants.

The group’s concerns are amplified by the eligibility of these imports for preferential treatment under the U.S.-Mexico-Canada trade agreement and a $7,500 electric vehicle tax credit, potentially undermining the competitiveness of US automakers. In response, the Chinese embassy defended its auto exports as a testament to China’s high-quality, innovative manufacturing industry, offering “cost-effective and high-quality products globally.”

The debate has gained further traction with reports of China’s BYD setting up an EV factory in Mexico, positioning itself as a formidable competitor in the global EV market, recently surpassing Tesla in sales.

This comes as a bipartisan group of US lawmakers have called on the Biden administration to increase tariffs on Chinese-made vehicles and explore measures to curb Chinese automotive exports from Mexico. They suggest raising the existing 27.5% tariff on Chinese vehicles.