In the picture
Mexico intention of raise tariffs up to 50% on goods from China and other countries may appeal to Trump but it could create other problems
The recent proposal by Mexico's president, Claudia Sheinbaum, to increase tariffs on nearly 1,500 products from countries with which Mexico has no free trade agreements, particularly with China and other Asian countries, is a move that goes beyond simple economic protectionism. It is a form of a complex geopolitical strategy aimed at balancing the US relationship with the need to strengthen the national economy. While Sheinbaum has denied that the measure is designed to please Trump, the broader context of escalating trade tension and the upcoming review of the USMCA suggest a far more calculated and intentional strategy.
The initiative, sent to Congress, seeks to amend the Law on General Import and Export Taxes in order to raise tariffs up to a ceiling of 50% on 1,463 goods across about twenty sectors, such as automobiles, textiles, apparel, footwear, toys, and furniture. The countries most affected by this proposal would be China, India, Indonesia, Thailand, and Türkiye, as well as South Korea and Russia. If approved by the Congress, where Morena and its allies hold a majority, the measure would take effect 30 calendar days after its promulgation and remain in force until December 31, 2026.
The Secretary of Economy Marcelo Ebrard made a point that the measures are intended to protect Mexico's strategic industries and prevent the loss of roughly 325,000 jobs in states such as Nuevo León, Jalisco, the State of Mexico, and Querétaro. The plan seeks to harness the domestic market so that production takes place within Mexico, thereby helping to balance foreign trade accounts. President Sheinbaum stated that this initiative responds to a national project to strengthen the economy. She further argued that the proposal falls within the framework established by the World Trade Organization (WTO).
Trump's shadow over automotive geopolitics
The ever-present tension of tariffs between the United States and Mexico is deeply tied to Trump using tariffs as a tool to pressure Mexico on issues of immigration and drugs. The threat of imposing a 25% tariff on Mexican products, with the primary aim of halting drug trafficking into the United States, has been a recurring theme over the last months.
By March 2025, President Donald Trump had planned to officially declare the imposition of 25% tariffs on products imported from Mexico, with the aim of stopping drug trafficking. However, executives from major U.S. automakers such as Ford, General Motors, and Stellantis persuaded Trump to postpone the tariffs. On July 31, 2025, Sheinbaum and Trump agreed to delay by 90 days the implementation of US tariffs on Mexico, avoiding the increase that had been scheduled for August 1. Trump had previously floated the idea of imposing 25% tariffs on automobiles and 50% tariffs on steel, aluminum, and copper from Mexico.
The automotive sector is quite vulnerable to these regional dynamics. Mexico is the world's seventh largest vehicle producer and the leading exporter of auto parts to the United States, accounting for 3.5% of national GDP and 18% of manufacturing GDP, while generating more than 900,000 direct and indirect jobs. Around 75-80% Mexico's automotive production is destined for the US market. Trump's stance is shaped by his American first slogan, which aims to relocate automotive companies back to the United States. Such a move would severely impact Mexico's economy, resulting in significant job losses and a sharp decline in exports.
Sheinbaum's tariff plan is designed to appeal to Donald Trump and avert US tariffs against Mexico. Reports indicate that Trump suggested to Mexican officials that they could avoid American tariffs by imposing their own on China. The 2026 review of the US, Mexico, and Canada Free Trade Agreement (USMCA) is a very important juncture, and the Mexican government is eager to preserve the agreement. Mexico's decision to implement tariffs on Chinese products could be seen as a strategy to show alignment with Washington's policies, particularly in the context of its economic rivalry with China.
However, Claudia Sheinbaum has dismissed the idea that her actions are driven by pressure from Trump, rather insisting that they are part of a national project. Gabriella Siller, an economic analyst with Banco Base argues that the imposition of tariffs by the United States is a strategy aimed at promoting deeper regional integration under USMCA, while reducing China's role in North America.
Mexico at the heart of US-China tensions
Mexico's relationship with China has increased concerns with both Canada and the United States, who fear that Mexico could serve as a back door for Chinese products to enter the US market under the preferential terms of the USMCA. Chinese foreign direct investment in Mexico has grown by 50% since 2018, with a 60% increase in Chinese container shipments to Mexico between 2023 and 2024. In 2023, Mexico became the world's second largest importer of Chinese cars, following Russia, and Chinese companies have expanded their presence in Mexican industrial parks, particularly in sectors targeted by U.S. tariffs, such as automotive and electronics.
The growing Chinese influence in Mexico's strategic sectors, combined with the presence of companies linked to China's military apparatus in the telecommunications and surveillance industries, has raised concerns in Washington over both security and economic implications. The Biden administration had considered banning Chinese hardware and software in connected cars on U.S. roads.
China, for its part, has reacted strongly to Mexico's proposed tariffs, declaring that it "firmly rejects moves that are taken under coercion to constrain China or undermine China's legitimate rights and interests under any pretext." The Chinese Ministry of Commerce has warned of possible countermeasures. President Xi Jinping has been pursuing a global diplomatic defense against Trump's protectionism policies while offering investments and trade agreements. Beijing views Mexico as a strategic partner for circumventing US tariffs by using the USMCA as a bridge. Chinese Foreign Minister Wang Yi voiced interest in Chinese companies in expanding their investment in Mexico back in May 2025.
Mexico finds itself in a delicate geopolitical position. On one side, the United States remains its principal trading partner, and excessive dependence on China could provoke Trump and serve as a pretext for further tariffs. On the other side, diversifying trade ties could reduce Mexico's reliance on Washington, but China itself may prove to be an unpredictable and potentially coercive partner. Mexico's strategy, embodied in its own 'Plan Mexico' seeks to strengthen the domestic economy, promote national production, and attract foreign investment under a nearshoring framework, but it must do so while carefully navigating the rivalry between the world's two largest economic powers.
Beyond the tariffs
Mexico's vulnerability to shifts in US trade policy is high due to its dependence on automotive exports to the north. An economic contraction, a weaker peso, and higher inflation are all potential consequences. The departure of US automakers plants from the country as has already happened with Stellantis would have a devastating impact on both employment and investment.
The 'America First' policy has redefined global relations, using tariffs as a geopolitical weapon. This approach has created what some call a 'beggar's economy,' where countries and corporations must appeal directly to Donald Trump for exemptions or delays. In Latin America, the administration frames the region less as a partner than as a security threat linked to drugs, crime, migration, and increasingly, to China's growing presence. The result is a revival of Monroe Doctrine-style dominance, privileging control over cooperation.
Therefore, in this context, Sheinbaum's decision to impose tariffs, even though it has been officially presented as a domestic policy move to protect jobs and industry, the issue cannot be separated from external pressure. By strengthening its domestic market and encouraging national production, Mexico is also seeking to appease Washington's trade and migration demands ahead of the critical USMCA review in 2026. The challenge lies in striking this balance without provoking a negative reaction from the United States, while at the same time managing its deepening relationship with China, which offers investment and market opportunities but also risks generating friction with Washington.