Mexico's Bold Trade Move: Shaking Up Trade While Subtly Criticizing CCP Policy

Mexico this month enacted temporary import duties with levies ranging from 5 to 50 percent on over 500 product categories, marking a dramatic change in trade policy. The measure has an impact on nations with whom Mexico does not have official trade agreements. Analysts see it as an attempt to plug gaps in the market and subtly criticize Chinese policy. They claim that because of the geopolitical and economic context, Mexico's actions are both necessary and strategic.

The Mexican government announced new tariffs on 544 product categories in a decree on April 22. These tariffs affect a wide range of products, such as furniture, steel, aluminum, textiles, wood, footwear, plastics, chemicals, paper, cardboard, ceramics, glass, electrical items, transportation materials, and musical instruments. The order is in effect as of April 23 and will last for two years. It has no effect on countries that are part of Mexico's trade agreements, such as the US, Canada, EU, Australia, Japan, Chile, and Vietnam.

This change comes after an earlier announcement on August 15, 2023, of a rise in import taxes that targeted comparable products like aluminum and steel and had levies ranging from 5 to 25 percent.

Raquel Buenrostro, Mexico's secretary of economy, said that the main goal of the new regulations is to "prevent unfair competition" that might harm indigenous businesses during a speech at a Council of the Americas event on April 23. She brought attention to a wave of "undervalued," very cheap imports that were undercutting domestic output. The majority of the imports are from Asian non-trade agreement nations. China was clearly a major factor in these worries, even if it was not stated specifically in the context.

The project aims to strengthen the competitiveness of industrial sectors that are susceptible to global economic pressures, as made clear by the Mexican government.

Citing shortages of primary raw aluminum for the automotive and electronics sectors as well as a lack of local production, Mexico repealed its 35 percent duty on primary unalloyed aluminum and its 20 percent tariff on primary alloyed aluminum in a subsequent decree announced on May 8.

The United States, Mexico, and Canada Agreement (USMCA) provides the three nations with very advantageous tariff policies.

China has benefited from these advantageous practices since the start of the U.S.-China trade war, increasingly using Mexico as a conduit for Chinese goods to reach the American market.

U.S. Trade Representative Katherine Tai brought attention to the effects of Chinese policies and practices during her statement before Congress on April 17. She noted that these actions "have devastated many working communities and industries across our country." She gave the following industries as examples: vital minerals, electrical cars, solar panels, batteries, steel, and aluminum.

Mexico has become a major participant in the nearshoring space as Chinese businesses move their manufacturing facilities from China to the United States in order to benefit from lower labor costs and easier access to the American market.

Mexico's second-largest trade partner is China. China sent $81.5 billion worth of commodities to Mexico in 2023 and imported $18.7 billion, according to the UN Comtrade statistics. China's top exports are electronic components, kitchenware, and auto parts, whereas Mexico's top exports to China are crude oil, electrical machinery, and medical supplies.

The amount of containers transported between China and Mexico increased by 34.8 percent in 2023, a sharp contrast to the 3.5 percent rise recorded in 2022, according to data from market analytics platform Xeneta.

Mr. Sun said that Mexico's tariffs are obviously directed against China, particularly in light of the trade conflict that former US President Donald Trump started.

Mr. Sun claims that a significant increase of Chinese products entering Mexico with the intention of re-exporting them to the United States market in order to take advantage of the tax-exempt status provided by the USMCA agreement has occurred.

By using local packaging and certificates of origin, the Chinese Communist Party (CCP) has been able to evade taxes and quota systems and pass off Chinese commodities as items from Southeast Asia. This has been a long-standing tradition, according to Mr. Sun.


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