Volvo Cars and EV startup Polestar plan to use this provision to recoup the duties and 25 percent tariff on the Chinese-built Volvo EX30 crossover and Polestar 2 sedan using its exports of the U.S.-built EX90 and Polestar 3 crossovers. The trade compliance strategy is designed to give the Geely-affiliated automakers a price advantage in the U.S. on its vehicles assembled in China while encouraging further global exports of its U.S.-made electric vehicles.
Volvo’s strategy is not novel. General Motors uses duty drawback to subsidize the importation from China of its Buick Envision crossover, and a wide swath of the industry employs it to cost-effectively import auto parts built in China. Ford Motor Co. may do the same next year when it begins importing the redesigned Lincoln Nautilus from China.
Automakers, dealers, suppliers and organized labor all tend to view importation of vehicles from China — the world’s largest car market — as an existential threat. China does have competitive advantages in some areas of light-vehicle production, but in other areas, it lags significantly behind established Western brands.
Given its rapid progress, China may catch up, just as the Japanese auto industry did 50 years ago, forcing much-needed change at U.S. automakers.
That is what competition does, and why protectionism is never a winning strategy.
