Lock The Door Before Xi Arrives

Congress has fifty-eight days to turn a regulation into a law, and the Senate should spend them doing it.

The Connected Vehicle Security Act cleared the Senate Commerce Committee on July 22 by voice vote, with no senator objecting. It would write into permanent statute a Commerce Department rule that has done more to keep Chinese cars off American roads than any tariff ever levied on them. A rule is not a law and can be narrowed by whoever runs the Commerce Department, or softened at a negotiating table. President Xi Jinping arrives in Washington on September 24. The bill should be law before he lands.

In June, China exported about 905,000 passenger cars, up 80 percent from a year earlier, while domestic passenger car sales slumped 26 percent. S&P Global Ratings sees passenger car exports rising 30 to 50 percent in 2026, while AlixPartners has said total vehicle exports could reach about 10 million this year, from roughly 7 million in 2025.

Expanding into overseas markets has become necessary to survive. Chinese factories build more cars than China's weak economy can consume, and the surplus has to be sold somewhere.

Brussels imposed tariffs on Chinese electric vehicles in 2024, protecting an industry that was already in trouble. Stellantis, the French-Italian group behind Jeep, Peugeot, Fiat and Opel, wrote down 22 billion euros on its electric vehicle business after conceding it had overestimated demand. Its Cassino plant in Italy built 2,916 cars in the first quarter, down 37.4 percent. European car factories average roughly half capacity. Squeezed by tariffs and a shrinking market at home, BYD, China's largest automaker, opened talks to buy Europe's idle capacity.

Canada offers a closer lesson.

Rewind to January. Prime Minister Mark Carney met Xi in Beijing and agreed to admit 49,000 Chinese electric vehicles a year at a 6.1 percent tariff, down from 100 percent, in exchange for relief on Canadian canola exports. The quota took effect March 1 and rises 6.5 percent a year.

The 49,000-car import quota is shared by all Chinese automakers. Yet BYD plans to open twenty branded dealerships across Canada, an investment that makes sense only if the quota is eventually expanded. Analysts are watching whether Canada could become the gateway into the U.S. market, where tariffs have kept Chinese vehicles out. It also serves as the learning ground for the larger U.S. market.

Cars are the new front; aviation is the older one. Walk into a regional airport, and you will find a Cirrus on the tarmac, the largest maker of piston-powered general aviation aircraft in the United States. A subsidiary of the Aviation Industry Corporation of China, the state aerospace and defense conglomerate, has owned the company since 2011. Representative Pat Harrigan of North Carolina, who introduced a bill on July 16 to force federal review of such deals, says AVIC builds fighter jets and drones for the People's Liberation Army, and counts more than twenty Chinese acquisitions, investments or joint ventures in American general aviation since 2005. For two decades, no federal review covered these sales. The trend has begun to turn with AVIC agreeing in June to sell Continental Aerospace Technologies to an American private equity firm for roughly $535 million, subject to closing.

The tariff mechanism asks where a car is built. The Connected Vehicle Rule asks who owns the manufacturer and who writes the software. In its final days, the Biden administration finalized it through the Commerce Department's Bureau of Industry and Security, the agency that enforces export controls, barring vehicles from manufacturers owned or controlled by China or Russia. Software restrictions take effect with the 2027 model year, hardware in 2030. The Trump administration retained the rule, and last month it was used for the first time.

Polestar, a Swedish electric brand majority owned by China's Geely, builds the Polestar 3 in South Carolina. It was denied authorization to sell 2027 model-year vehicles anyway. Volvo, owned by the same parent, went through the same review and was cleared.

The Connected Vehicle Rule is already changing corporate behavior. Senator Bernie Moreno (R-OH) told the committee that Waymo, Google's self-driving unit, had been discussing China-sourced vehicle platforms with Geely and has now committed to looking at a Detroit-based manufacturer instead.

The bill would ban sales by any automaker that is more than 15 percent Chinese-owned. That would affect Mercedes-Benz, whose Chinese shareholders together hold close to 20 percent, even though it builds vehicles in Alabama and South Carolina. Ted Cruz (R-TX), who chairs the Senate Commerce Committee, said the provision would prevent the bill from passing the full Senate. Moreno responded that Mercedes would have until 2030 to comply and could apply for a waiver. Both senators voted for the bill. The provision needs to be rewritten, but that is a relatively minor fix.

The President has said he will discuss artificial intelligence with Xi in September. Cars have not been mentioned. This board has argued before that summits with Beijing tend to reward the guest. A statute would take the rule off the negotiating table.

The Senate has the votes and the calendar. Fix the clause and pass the bill before Xi lands.