The Trump administration rightly seeks to expand U.S. manufacturing, particularly in advanced industries such as aerospace, automotive, biopharmaceuticals, and semiconductors. As such, the administration is to be commended for notable successes in expanding U.S. manufacturing investment, touting as much as $5 trillion in new commitments.1 But not all manufacturers are created equal. U.S. policymakers must be attuned to both the nature of the foreign direct investment activity America attracts, especially from Chinese manufacturers that have been the beneficiaries of aggressive mercantilist practices, and their efforts to enable Chinese techno-economic power.

The appeal of letting Chinese automakers sell in America as long as they produce here is an appealing one. It would expand jobs, compared with importing Chinese vehicles, and any announcements could be touted as a win by the administration. This is perhaps why, in a March 2024 speech, then-candidate Trump commented that, “I’ll tell [Chinese automakers] if they want to build a plant in Michigan, in Ohio, in South Carolina, they can, using American workers, they can.”

As the Trump administration works through potential trade deals with a number of nations, it could potentially make permitting electric vehicle (EV) makers to build production facilities in the United States part of a grand bargain trade deal with China. China would benefit from this and the administration could use it as leverage for Chinese concessions.

But as attractive as this option might be in the short term, the administration should not allow Chinese EV makers—whether BYD, Nio, Xiaomi, or others—to construct manufacturing plants in the United States, especially when doing so would reward both Chinese mercantilist policies as well as Chinese EV firms’ gambit to circumvent the tariffs the United States has already sensibly imposed on them. This is principally because Chinese EV makers have benefitted considerably from aggressive mercantilist practices, and as such are fundamentally different from other foreign auto companies that manufacture and compete in the U.S. marketplace. Indeed, letting Chinese EV makers into the American vehicle market could be an ”extinction-level event” for the U.S. auto sector.

This report explores why the U.S. auto industry is vital for American economic competitiveness. It then examines the competitiveness of Chinese EVs companies, explaining why a great deal of that competitiveness stems from Chinese government support through mercantilist policies such as substantial industrial subsidization and forced technology transfer. It concludes by enumerating the myriad specific rationales why Chinese automakers should not be allowed to manufacture in the U.S. market.