On Friday, a group that advocates for U.S. manufacturing stated that the government of the United States should prohibit the import of inexpensive Chinese automobiles and components from Mexico. They cautioned that such imports could potentially harm the survival of American car companies.

The Alliance for American Manufacturing stated in a report that the introduction of affordable Chinese cars in the American market, supported by the financial and political resources of the Chinese government, may have a catastrophic impact on the U.S. auto industry.

The group suggests that the US should take action to prevent cars and car parts made in Mexico by Chinese companies from taking advantage of the North American free trade agreement. The report stated, “The loophole that allows for Chinese car imports should be closed to avoid widespread factory closures and job cuts in the US.”

The report stated that vehicles and parts manufactured in Mexico may be eligible for special benefits under the U.S.-Mexico-Canada trade agreement, as well as being able to receive a tax credit of $7,500 for electric vehicles (EVs).

The Chinese embassy in Washington replied by stating that China’s vehicle exports demonstrate the advanced progress and impressive innovation of China’s manufacturing sector. The rapid growth of China’s automotive industry has resulted in the production of cost-efficient, high-quality products available to the global market.

There has been renewed attention on the matter following reports that BYD, a Chinese company, intends to establish an electric vehicle manufacturing plant in Mexico. BYD, which offers more affordable models and a wider range of options, has surpassed its main competitor, Tesla, to become the leading seller of electric vehicles globally.

Tesla announced plans almost a year ago to build a factory in the northern Mexican state of Nuevo Leon. In October, Mexico said a Chinese Tesla supplier and a Chinese technology company would invest nearly a billion dollars in the state.

A nonpartisan team of American legislators has called on the Biden government to increase import taxes on cars made in China and explore methods to block Chinese businesses from shipping goods to the U.S. through Mexico.

A team of legislators encouraged U.S. Trade Representative Katherine Tai to increase the current 27.5% tariff on vehicles imported from China. They also emphasized the need for her office to be ready to handle the anticipated influx of Chinese vehicles being exported from other trade partners, like Mexico, as Chinese automakers aim to strategically expand their operations beyond China.

The CEO of the Alliance for Automotive Innovation, John Bozzella, expressed concern that proposed environmental regulations in the U.S. could lead to China having a greater influence in the supply chain for electric vehicle batteries and potentially dominate the American automotive market.

In December, the U.S. Treasury released guidelines regarding the $7,500 tax credit for electric vehicles, with the intention of reducing reliance on Chinese suppliers in the U.S. EV industry.