China‘s leading electric vehicle (EV) manufacturer, BYD Co., has paused its plans to build a major production facility in Mexico due to escalating trade tensions fueled by U.S. President Donald Trump’s aggressive tariff policies, according to a Bloomberg report. The decision reflects broader uncertainties in the global EV industry as automakers navigate shifting trade landscapes and geopolitical risks.

Trade Policies Disrupt Expansion

BYD had been evaluating three potential sites in Mexico for a new EV plant before halting its search last year, awaiting clarity from the U.S. presidential election outcome.

“Geopolitical issues have a big impact on the automotive industry,” said Stella Li, BYD’s Executive Vice President reportedly, in an interview in Bahia, Brazil, on Tuesday. “Now everybody is rethinking their strategy in other countries. We want to wait for more clarity before making our decision.”

Trump’s recent tariffs on imported goods, including autos, have upended supply chains, with U.S. automakers like General Motors projecting $4 billion in additional costs to shift production from Mexico to the U.S.

The decision also follows concerns from China’s commerce ministry, which delayed approval of BYD’s Mexico plant over fears that its technology could be accessed by the U.S., as reported by the Financial Times.

Mexico’s President Claudia Sheinbaum noted in March that BYD had not submitted a formal investment proposal, further clouding the project’s future.

Strategic Pivot to Brazil

While Mexico remains on hold, BYD is advancing its global footprint elsewhere. On Tuesday, the company celebrated the opening of its first factory outside Asia, located in Camaçari, Brazil. The facility, designed to produce 150,000 vehicles annually, will begin commercial production within two months, assembling partially built vehicles shipped from China.

“We should slow down, step back from the focus on speed. We need to work more with local companies,” Li stated, emphasizing a more deliberate approach to international expansion following labor controversies during the plant’s construction.

The Brazil plant’s initial output is modest but ambitious, with plans to double capacity to 300,000 vehicles within two years and potentially double again thereafter. However, BYD faces challenges, including a request to the Brazilian government for a 12-month import tariff reduction on vehicle kits.

“If the partially built cars BYD plans to complete in Brazil are taxed at the same rate as finished vehicle imports, it makes no sense for you to import a semi-disassembled car,” said Alexandre Baldy, senior vice president of BYD Auto Brasil.

Implications for EV Industry

BYD’s retreat from Mexico underscores the vulnerability of global EV supply chains to trade policies. For EV enthusiasts and industry professionals, this signals potential delays in affordable, high-quality vehicles reaching North American markets.

The tariffs could increase costs for consumers, with imported EVs potentially facing price hikes of 10–20% depending on the final tariff structure. Meanwhile, BYD’s focus on Brazil highlights a strategic shift toward markets with fewer trade barriers, though local challenges like labor regulations and import taxes remain.

The pause in Mexico also raises questions about the region’s role as an EV manufacturing hub. As trade policies evolve, EV makers must balance cost, technology security, and market access—a complex equation that will shape the industry’s future.