China Warns Mexico: Trade War Looms Over 50% Tariffs

Mexico Defends Tariffs Against China, Beijing Threatens Retaliation

Mexico’s economy secretary has firmly rejected China’s complaints regarding recently imposed tariffs, asserting the nation’s right to protect its domestic industries from what he described as state-subsidized, below-cost competition. This escalating trade dispute threatens to complicate Mexico’s ongoing negotiations to renew its crucial trade agreement with the United States.

Beijing has issued a stern warning to Mexico, indicating its readiness to implement retaliatory measures. This comes after China’s Ministry of Commerce (MOFCOM) concluded a formal investigation into tariffs Mexico levied on over 1,400 categories of goods originating from Asian nations.

China’s Grievances and Accusations

MOFCOM stated that the tariffs, which range from 5% to 50% and were implemented on January 1, significantly restrict the flow of Chinese goods, services, and investment into the Mexican market. Beijing contends that these measures constitute considerable barriers to trade, impacting more than US$30 billion in Chinese exports. The ministry further claims these tariffs have inflicted losses of approximately US$9.4 billion on China’s mechanical and electrical industries.

In a statement released through the state news agency Xinhua, MOFCOM asserted its authority to “apply the pertinent measures to firmly safeguard the interests of Chinese industries.”

Mexico’s Justification for Tariffs

Mexico’s Economy Secretary, Marcelo Ebrard, unequivocally dismissed China’s position. He emphasized Mexico’s sovereign right to shield its domestic industries from what he characterized as unfair competitive practices.

Speaking at the annual assembly of Caintra, a prominent industrial chamber in Monterrey, Ebrard explained the rationale behind the tariffs. “We put tariffs in place because we consider that there is an effort to expand the market with government support,” he stated.

Ebrard elaborated on the alleged predatory pricing strategies employed by some Chinese firms. “Your exit price is lower than what it costs the other guy to open his shop. You are going to bankrupt any company.” He provided a specific example, citing Chinese metal products being sold in Mexico at US$150 per tonne, a price he argued was only achievable due to state subsidies. Sectors such as textiles, footwear, and steel were highlighted as areas where Mexican producers face severely unequal conditions.

“The playing field is very uneven. With the tariffs, it starts to level out,” Ebrard remarked. He also countered Beijing’s assertion that the tariffs violated trade rules, stating that Mexico possesses the inherent right to implement such measures.

Legislative Basis for Tariffs

The implementation of these tariffs is rooted in reforms approved by the Mexico Senate in December. The country’s general import and export tax law was amended with a significant majority vote. This legislation specifically targets goods from countries that do not have a free-trade agreement with Mexico, a list that includes South Korea, India, Vietnam, Thailand, and China.

China had previously signaled its disapproval of these reforms when they were first passed, initiating its formal investigation under its foreign trade law and trade barrier regulations in September.

Broader Trade Implications and USMCA Review

Beijing has warned that the tariffs will inevitably increase costs for Mexican consumers. Furthermore, it has pointed to a particular impact on its automotive and auto-parts sectors. According to MOFCOM data, Mexico was the primary destination for Chinese vehicle exports in 2025.

Mexican President Claudia Sheinbaum has consistently maintained that the tariffs are not exclusively aimed at China and are not a consequence of pressure from Washington. However, their implementation coincides with the crucial preparations for the review of the US-Mexico-Canada Agreement (USMCA), which is scheduled for 2026.

The USMCA review process requires each member nation to decide on the extension of the agreement for an additional 16 years or to propose modifications, with a deadline set for July 1.

Bilateral Negotiations and US Concerns

Ebrard confirmed that formal discussions between Mexico and the United States have commenced. He expressed cautious optimism regarding the early stages of these negotiations. A key priority for Mexico in these talks is the removal of existing US tariffs on Mexican steel, some of which can reach 50%.

The United States has long urged the Mexican government to prevent Chinese manufacturers from utilizing Mexico as a conduit to export goods into the US market under preferential trade terms. Both the Biden and Trump administrations have maintained elevated tariffs on Chinese products. Former President Trump, in particular, had previously warned Mexico and Canada against serving as export platforms for China or other Asian economies.