While we talk about car bombs, terrorism and the Prosecutor’s Office, Mexico imposes tariffs of 7 to 50% on 1,463 products from countries with which we do not have Free Trade Agreements. It is one of the most important decisions in recent decades in commercial matters. It is designed to mark distance with China and pave the way in the USMCA negotiation with the United States. With this, Mexico responds to one of Donald Trump’s demands and joins one of the new trends: protectionism.
How will China react? It is our second trading partner and the rising world power. In 2024, we bought merchandise worth $129.457 million from them and sold just $9.937 million from them. With them we had a trade deficit of 119 billion dollars, equivalent to 9% of GDP.
China’s reaction will not be immediate or impulsive, but it is better to be attentive. There was some care in the forms of the bill that imposes tariffs and the communication related to it, but no one is deceived: the measures are against China, the other affected countries are secondary actors, collateral damage in this trade war skirmish… where the script is written from the White House.
Timing matters. The initiative reaches the Mexican Congress the week following the publication of the National Security Strategy by Trump. It systematizes many of the things we had heard from the American president. The economy is inseparable from National Security. Business partners must be allies and align. Mexico cannot be the door through which the Trojan Horse made in China enters the United States.
What part of the 129,547 million dollars that we bought from China ended up in the United States, as “Mexican” exports? It is one of the questions asked in the United States. We assume that Marcelo Ebrard’s team has the answer ready and perhaps has already delivered it. How big are Chinese investments in Mexican territory? In December 2023, Janet Yellen, the Biden administration’s Treasury Secretary, traveled to Mexico and in her meetings with Mexican officials made it clear that they did not believe the official figure, in which China is not in the Top 10 of foreign investors in Mexico.
Everyone knows that there is a huge under-reporting of Chinese investment. Unofficially, it is recognized that it could be 10 times higher than the official figure. At that time, during Yellen’s visit, the suggestion was raised that Mexico establish a foreign investment commission similar to the one the United States has. That would imply a more rigorous registry, but also a mechanism for approving or vetoing foreign investments in strategic sectors. The United States does not want a Chinese presence in Mexico in Telecommunications, Mining, automobiles or semiconductors. In Biden’s time, those were suggestions that could be ignored. In the Trump era, they will be demands, we will see if they can be ignored.
Let’s return to the imposition of tariffs that Congress will approve this week. The key will be in the implementation and the intersection with other topics. There will be an inflationary impact, among other things because we have been “connected” to Chinese and Asian suppliers for years. The clothes, footwear and many of the things we have in our homes are Made in China or Made in Asia. Tariffs are inflationary.
Implementation will be much more complicated than passing a Law in a controlled Congress. One of the biggest challenges will be to prevent tariffs from being evaded through smuggling. We have administrative simulation and bronco smuggling. Billions of pesos move there, in a network of complicity that involves customs officials, customs agents, businessmen and politicians. These networks do not end by decree nor do they disappear when an initiative is approved.
We have a new Customs Law that was passed in October and will come into full force next year. Can we prevent the massive arrival of illegal merchandise? It is an issue that has been unresolved for decades. A key issue for public finances, National Security and for our international commitments. Big Brother is watching us.
