China’s Ministry of Commerce warned Mexico Thursday to “think twice” before implementing planned 50% tariffs on Asian-made vehicles, threatening countermeasures that could disrupt $52 billion worth of bilateral trade relations.
Beijing Issues Stern Warning Over Planned Vehicle Duties
The escalation follows Mexico’s announcement on Wednesday to increase duties on Asian vehicles, particularly Chinese imports, from the current 20% to 50% as part of broader federal budget proposals affecting Mexican imports, reported CNBC.
Mexican Auto Industry Stakes Rise
Mexico’s Secretary of Economy Marcelo Ebrard told reporters the increased tariffs require Congressional approval and would take effect 30 days after passage. The automotive sector employs more workers than any other industry in Mexico, according to Jorge Guajardo, former Mexican ambassador to China and Washington-based partner at Dentons Global Advisors.
“At 50%, the tariffs are lower than the 60% tariffs Russia applies to Chinese cars,” Guajardo said Friday. He noted China hasn’t leveled similar accusations against Russia or Brazil, which imposed 35% electric vehicle import tariffs in July.
Chinese Investment at Risk
More than 20 Chinese auto parts manufacturers announced over $7 billion in Mexican investments between June 2022 and July 2024, according to the Coalition for a Prosperous America. However, completion status remains unclear, with electric vehicle giant BYD Co. Ltd. (OTC:BYDDF) (OTC:BYDDY) notably delaying its anticipated Mexican factory construction.
China has become Mexico’s top destination for car exports, based on China Passenger Car Association data, according to the report. The central American country benefits from tariff-free trade under the United States-Mexico-Canada Agreement, which requires greater regional vehicle content than its predecessor, NAFTA, according to the report.
Broader Trade War Implications
The Mexico dispute unfolds amid escalating U.S.-China trade tensions. Chinese exports to the United States plunged 33% year-over-year in August, while U.S. imports to China dropped 16%, according to economist Mohamed El-Erian‘s analysis of Chinese customs data.
Nearly half of 254 U.S. companies surveyed by the American Chamber of Commerce in Shanghai want complete tariff elimination on Chinese goods, citing revenue volatility from trade uncertainty.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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