The Mexican government has announced plans to increase customs tariffs. Asian countries in general, and China in particular, are being targeted. The measure is expected to be adopted by Parliament in November before being implemented next January for a period of one year.
These measures have been presented as a tool to protect domestic industry from cheap imports. Mexico's bilateral trade deficit with China has effectively doubled over the last ten years. The trade surplus with the United States has also doubled over the same period and the Mexican president seems to be sending more and more signals to the Trump administration, showing her willingness to reduce trade with China, with a view to the upcoming negotiations on the renewal of the USMCA, scheduled for July 2026.
Nearly 20 sectors would be affected by the new Mexican tariff measures. In the automotive sector, tariffs could rise to as high as 50%. Since 2021, Mexican imports of light vehicles from China have increased almost fivefold and those of "spare parts and accessories" have more than doubled. Over the same period, US imports of light vehicles from Mexico have also doubled.
All of this suggests that Mexico has developed a role as a "connector" between China and the United States since Trump's first term in office and that Chinese components are increasingly integrated into the Mexican supply chain. Parts enter Mexico, are processed and assembled, and then re-exported to the United States, allowing US tariffs to be partially circumvented.
The tariffs proposed by Mexico could facilitate negotiations with Washington on the USMCA, demonstrating a willingness to reduce Mexico's role as a "connector" country. However, Mexico's protectionist measures could also hurt the economy, as they could lead to a loss of competitiveness. As can be seen in the graph, local production in the automotive sector has declined since the first wave of US tariff increases between 2018 and 2022, and again in 2025.
The development of locally produced substitutes for Chinese imports will take time, which will mean higher supply chain costs in the short term, as the substitute products will be imported and are likely to be more expensive than Chinese products.
Furthermore, if, as announced, the measure is temporary, there will be very little incentive to invest in the development of specialized products that would become uncompetitive once tariffs are removed. These observations also apply to other sectors beyond the automotive sector. Ultimately, given the importance of Chinese imports (both intermediate goods and final consumer goods), producer prices and the inflation index could rise in the coming months.
