Block Chinese Automotive Investment Before It’s Too Late

Automotive manufacturing is at the heart of the American industrial economy, supporting millions of jobs across automakers, suppliers, dealerships, and the aftermarket, and driving innovation from mass production to advanced batteries. For these reasons, the United States should block Chinese automotive investment and protect the companies that make up our domestic industry. We should continue to support a strong regional supply chain through President Trump’s United States-Mexico-Canada Agreement (USMCA) and encourage continued Foreign Direct Investment (FDI) from our allied partners such as Japan and Korea.

USMCA required that 75% of a vehicle’s value originate in North America. This shifted supply chains for manufacturers from Chinese factories to the United States. Auto manufacturers have announced more than $1.2 trillion in new U.S. investment in 2025. FDI from our foreign allies has helped build industry strength: Honda and Hyundai have invested in American plants, hired American workers, and built relationships with domestic suppliers.

I support foreign investment that expands production under fair market rules. Chinese automakers and parts suppliers present a different proposition, carrying three distinct risks: continued state subsidies, excess output that drives down prices, and expanded access to sensitive technology.

U.S. suppliers already face tight margins while paying for new equipment, technology, and workers. They cannot sustain another round of price pressure created by the Chinese government’s mercantilist strategy.

For these reasons, the United States should maintain policies that block Chinese automakers and suppliers seeking to sell, import or manufacture vehicles inside the U.S. and protect the companies that make up our domestic industry. As the USMCA undergoes its 2026 review, and we start to see the FDI start to be invested from 2025 commitments, we should double down on the fair and free trade in our region to supplant China’s attempt to dominate manufacturing. 

Continued State Subsidies 

China can subsidize a company long after it opens a U.S. factory through direct financing, or indirectly through a parent company’s inexpensive components, preferential loans, or favorable terms on inputs from China.

We must learn from Europe’s mistake that the European Commission acted only after finding unfair subsidization already embedded in China’s electric vehicle value chain, imposing countervailing duties to catch up.

Over time, a Chinese-owned supplier could underprice independent American competitors even when both employ American workers, forcing automakers to demand matching pricing across the supply chain. Smaller companies would be forced to cut investment, accept unsustainable contracts, or close.

China has a history of pervasive dumping and subsidization, while our foreign allies have for years demonstrated adherence to fair-trade rules.

Excess Output to Drive Down Prices

Subsidies do more than lower costs, they encourage companies to build more capacity than customers need. The Office of the U.S. Trade Representative has identified structural excess capacity in China, naming automobiles and auto parts among the sectors driving its export surplus.

Sustained oversupply can push prices below levels that let companies replace equipment, train workers, and earn a return. That pressure flows from automakers through their entire supply base, leaving smaller manufacturers with fewer orders and less capital to invest.

Europe offers a warning. Chinese brands have gained ground while established automakers contend with intense pricing pressure and restructuring. The U.S. should address excess capacity before state-backed production is established inside the U.S. market. 

Access to Sensitive Technology

Modern vehicles contain software, semiconductors, sensors, and communications systems. In some cases, equipment integrated into U.S. autos, or the factories and skilled labor producing those components, can be considered dual-use, serving both commercial and defense markets.  

Chinese-owned automakers and suppliers operating here would gain proximity to American engineers, manufacturing processes, and research partnerships, and any U.S. company seeking a contract could face pressure to share design files or other intellectual property as the price of the relationship.

Semiconductors require particular care. A Chinese-owned company with U.S. operations could gain access chip designs, manufacturing know-how, and suppliers it could not engage with in the same way from China. 

The Department of Commerce has already restricted certain connected vehicles, software, and hardware linked to China or Russia, including sales by covered manufacturers even when vehicles are built in America. That decision recognizes a simple fact: the location of a factory does not settle who controls the technology or where data may travel. The same scrutiny should apply to intellectual property and critical components throughout the automotive supply chain.

China will present every one of these moves as ordinary investment. In reality, each one serves a strategy to erode U.S. competitiveness. Federal review should examine subsidies, production volumes, ownership, supplier contracts, and technology transfer. Chinese automotive investment that fails that test should be blocked, not approved with conditions. America should welcome capital that strengthens its auto industry and protects national security. It should not invite a mercantilist nation that underprices our suppliers, floods our market, and puts American technology within reach of an adversarial competitor.

Alex Krutz is the managing director for Patriot Industrial Partners, an industrial consulting firm. Until December, he served as the deputy assistant secretary for manufacturing at the Commerce Department, where he advanced policies in support of U.S. manufacturing.