[MEXICO CITY] Mexico plans to impose tariffs of as much as 50 per cent on cars and other products made by China and several Asian exporters, aligning the country more closely with US protectionism as President Claudia Sheinbaum prepares for talks over North America's free-trade deal.
Higher tariffs would apply to a list of more than 1,400 categories of products coming from countries with which Mexico has no trade agreement, Economy Minister Marcelo Ebrard said on Wednesday (Sep 10), describing them as part of efforts to protect Mexican industry. China, South Korea and India are among the exporters that would be hit under the proposed levies, which must be approved by Congress.
The import taxes would also affect items such as auto parts, steel, toys and furniture, with rates of 10 per cent to 50 per cent depending on the category.
"We are going to take it higher to up to 50 per cent, which the World Trade Organization allows us to do. Why? Because the prices at which they are arriving in Mexico are below what we call reference prices," Ebrard said on the sidelines of an event in the state of Mexico, referring to the car levy. "The main objective is to protect jobs."
Mexico has become the biggest destination for cars from China, much to the chagrin of its northern neighbour as US President Donald Trump wages a trade war on the Asian country. The move serves to appease Mexico's largest trade partner, but also raises the spectre of a broadening economic conflict as Chinese producers seek markets beyond the US.
The US and Canada have a free-trade pact with Mexico known as the USMCA, meaning they'd be unaffected by the tariffs. Both have also made moves in recent years to keep Chinese vehicles from entering their markets.
"It's a protectionist measure, very much in Trump's style, that suggests creating a common bloc against China. It's to be expected ahead of the review of the USMCA," said Gabriela Siller, director of economic analysis at Mexican bank Banco Base. "It allows Mexico to appease Trump, and in the process collect more money. But there is a cost, and it will be felt by both consumers and producers."
The terms of the USMCA call for a review in 2026, which may open the door for renegotiation between the three countries.
Other countries that would be affected by the tariffs because they do not have trade agreements with Mexico include Thailand, Indonesia, Russia and Turkey. The move could help deter Chinese companies from sending exports through those countries to skirt tariffs. The European Union, Japan, Malaysia, Vietnam and Singapore are exempt from the levies.
The proposal was included in the 2026 budget plan the government sent to Congress this week, a plan first reported by Bloomberg in August. The bill is likely to be approved, since the ruling party has comfortable margins in both houses. The tariffs would then take effect 30 days from their publication in Mexico's official gazette, Ebrard said.
Lawmakers are evaluating the tariff proposed for each product before discussing them in the relevant committees of Congress, according to Alfonso Ramírez Cuéllar, a member of the lower house's Finance Committee.
The plan, Ramirez Cuellar said, will help strengthen trade relations in North America amid negotiations with the Trump administration. Mexico has already increased tariffs on textiles, footwear and small imports from online stores such as Shein and Temu, he added.
Mexico has replaced Russia as the top destination for exports of Chinese cars, which rose by nearly a quarter in the first half of 2025 compared with the same period a year earlier, according to the China Passenger Car Association.
General Motors, Ford Motor and Stellantis, which owns the Chrysler, Jeep and Ram brands, ship their own China-made cars to Mexico and other parts of Latin America. Other cars from Chinese companies, such as BYD, have become a popular option for Uber drivers.
Guillermo Rosales, the chief of Mexico's auto dealers association AMDA, said that car prices in Mexico will likely rise due to the higher tariffs.
"This decision by the Mexican government represents a drastic change for the vehicle trade," he said. "As available inventories are depleted, prices would have to be adjusted. Competition in the domestic market will be limited, and consumers will have fewer choices."
Rosales said that the tariff hike would affect investment made by domestically owned distribution companies that have installed more than 800 points of sale for vehicles offered by Chinese brands. This network represents more than 60 billion pesos (S$4.1 billion) in investment and more than 32,000 direct jobs, he said.
"The cost of purchasing electrified vehicles, plug-ins, hybrids and pure electrics will also rise," said Rosales.
Other sectors could face similar risks. China runs a large trade surplus with Mexico that reached US$71 billion last year. Mexican authorities have urged companies to seek more local suppliers, but industry analysts warn that it is hard to make a fast change.
"Ideally, you would first make sure that you have enough capital and industrial capacity to start producing more of those inputs," said Diego Marroquin, a fellow at the Washington-based Center for Strategic and International Studies. "That's a process that takes years, not a few months." BLOOMBERG