As Mexico shifts trade posts and raises tariffs, China urged to alter its own approach to maintain gains

Name: An unwinnable conflict? The US-China trade war, 5 years on
Uploaded: 2023-09-21T15:00:20.000Z
Duration: 14 min 45 s
Description: An unwinnable conflict? The US-China trade war, 5 years on

Mexico, an increasingly important trade partner for China, has increased tariffs by 5 to 25 per cent on 392 imports for countries it has no free-trade deal with

While too early to know the impact of tariff changes introduced in August, trade lawyer warns Chinese companies to expect more trade-related costs in Mexico

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Of all Mexico’s trading partners, China, which accounts for 17.9 per cent of Mexico’s total imports, is expected to be affected most by recent tariff changes. Photo: Xinhua

Kinling Loin Beijing

Published: 11:00pm, 21 Sep 2023Updated: 11:37pm, 21 Sep 2023

Mexico’s new tariffs on imports from its trading partners are creating uncertainties for China, which has increased its exports to and investment in Mexico in a string of supply chain shifts.

The country increased tariffs by between 5 and 25 per cent on a total of 392 imports for countries – including China- with which Mexico has no free-trade deal. The move that took effect on August 16 affects nearly 90 per cent of Chinese exports to the country.

Mexico has become an increasingly important export destination for China since the Sino-US trade war began in 2018. To augment supply chains to get around United States trade curbs, some Chinese businesses have either moved their factories to Mexico or made Mexico a transit port for re-exporting into the American market.

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An unwinnable conflict? The US-China trade war, 5 years on

In the first six months of this year, both Mexico and Canada have replaced China as the biggest import locations to the US. The US has imported US$203 billion in goods from China, a 25 per cent drop from the same period in 2022.

Of all Mexico’s trading partners, mainland China, which accounts for 17.9 per cent of Mexico’s total imports, would be affected most, although Mexico’s other importers, Brazil, Taiwan, South Korea and India are also expected to suffer because they do not have a free-trade pact with the country.

Steel, textiles, footwear, transport machinery and furniture, which made up 86 per cent of China’s total export value to Mexico in 2022, are expected to be hit hardest, according to calculations by Chinese trade data platform Shipping China.

He Yadong, spokesman for China’s Ministry of Commerce, said the tariffs would increase production costs of downstream industry and had affected bilateral trade.

“We hope Mexico can stick to the free-trade principle and remain cautious in implementing such measures,” He said at a press conference last week. “The higher tariffs of Mexico will affect investors’ confidence. China is closely monitoring the issue.”