Yet Turkey’s use of trade tariffs as a tool of investment suasion is a gamble that may pay off only when certain conditions are in place. Companies such as BYD ultimately need a strong business case to set up a facility to jump local tariffs. They need sizeable domestic markets with good prospects; good access to other markets in the region — both in terms of regulation and infrastructure — and an automotive cluster that allows production at convenient costs.
When all these factors are in place, the cost of losing access due to trade barriers is higher than the cost of investing in a new facility — in this regard, Turkey is a case in point. Brazil, where BYD and other automakers doubled down their investment commitments after president Lula reintroduced import duties on EVs at the beginning of 2024, is another. But when the combination of these factors is not compelling, trade tariffs risk backfiring as producers opt for geographies with lower trade barriers that guarantee a similar level of domestic and international market access.