Mexico May Sue The U.S. Over EV Tax Credits

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The Build Back Better Act still has yet to pass the Senate or be signed into law, but it’s already facing pushback. And not just from Republicans. Mexico has threatened to sue the U.S. over a section in the bill that would subsidize union-built electric vehicles, the Washington Post reports.


According to Tatiana Clouthier, Mexico’s secretary of the economy, the plan to offer a $12,500 tax credit to people who buy an EV that was built in a union plant would go against the non-discrimination clauses that are part of the free trade agreement between the U.S., Mexico and Canada. Clouthier’s argument is that the tax credits would give U.S.-built EVs an advantage over those built in Mexico, which she claims violates the agreement.

“We would apply trade reprisals. This bill is not consistent with the U.S. obligations under the TMC and the rules of [the] World Trade Organization,” she said.

Whether Mexico will follow through on that threat remains to be seen. The Senate is expected to vote on it later this month, but there are no guarantees it will pass.

It’s also not the only source of tension between the U.S. and Mexico right now. Andrés Manuel López Obrador, Mexico’s president, recently proposed changes to the Mexican constitution that would give the state-owned utility company a minimum of 54% of the electrical market. It would also end contracts with 34 privately owned power plants and make it illegal for 239 other plants to sell electricity.

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Ken Salazar, the U.S. ambassador to Mexico, has already said he has “serious concerns” about those proposed changes, believing they also unfairly favor domestic electricity production.

How the two countries will work out their disagreements still remains to be seen. But it’s also clear that figuring out modern energy and pollution policies is far from simple or straightforward.

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