New Mexican Tariffs Strike a Blow Against China

Mexico is picking a side in the U.S.-China trade war. On December 10, the country’s congress voted to authorize tariffs of up to 50 percent on imports from China in a significant escalation of its existing tariff policy. The president, Claudia Sheinbaum, is expected to sign the bill in January. The Mexican government is characterizing the move as an effort to ensure that “production takes place in Mexico and employs Mexican workers.”

Some see the tariffs — which will also hit products from India and South Korea — as an attempt to appease the United States ahead of crucial trade talks next year. But whatever the reason behind them, Mexico now joins the United States in shielding North America from Chinese market and trade manipulation.

Victims of China’s Trade Practices Span the Globe

The Trump administration has taken a hardline approach to China’s unfair trade practices, which include price manipulation, state-mandated overproduction, and high subsidies.

While consumers may briefly benefit from lower prices, these tactics hollow out local industries, stifle job growth, and create supply-chain dependencies that Beijing can weaponize, as seen with recent rare-earth export controls. The manipulations also come at the expense of China developing its own consumer base, hurting its own economy’s long-term health.

Tariffs will help raise the price of Chinese goods to their true, unsubsidized value, leveling the playing field to allow both American and Mexican firms to compete in their own North American markets. They will also protect Mexico from becoming a dumping ground for the Chinese overproduction that floods global markets. The European economy is being crippled under similar trade and industrial pressures, which French President Emmanuel Macron called “a question of life or death for European industry.”

A Promising Sign for USMCA

Under the trade agreement negotiated by President Donald Trump in his first term, the United States, Mexico, and Canada enjoy preferential access to each other’s markets, strengthening North American economic integration. But Trump administration officials have voiced concerns that countries outside of the pact — especially China — exploit its rules by routing goods through Mexico or Canada to hide their true origin and secure lower tariffs or lighter inspections.

This transshipment has become a central flashpoint in the upcoming July review of the United States-Mexico-Canada Agreement (USMCA), as U.S. Trade Representative Jamieson Greer signals that the United States may walk away from the agreement entirely. However, Treasury Secretary Scott Bessent spoke favorably of the Mexican tariffs when they were first proposed by Mexican officials in February, suggesting Canada should follow suit to “fortress North America from the flood of Chinese imports.”

With its new tariffs on China, Mexico has made it harder for Beijing to offload its subsidized, underpriced production surplus into both the Mexican and greater North American markets. Mexico is protecting fair competition in both markets while also becoming more aligned with the United States on critical economic security matters that will define USMCA discussions.

Increased Coordination in North America Is Crucial

Mexico’s tariff decision is a strong first step but can’t be the last. Canada should follow Mexico’s lead and adapt its tariff regime to better protect against China’s market manipulations that threaten North America’s economies. Already, Ottawa has put a 100 percent tariff on Chinese electric vehicles.

Even so, China will be looking for ways to get around the new tariffs, and one way they have done so in the past is to manufacture goods in the markets where they are sold. Unfortunately, even when Chinese companies do this, they still benefit from unfair trade practices like subsidies and price manipulation courtesy of Beijing. To combat this, the governments of the United States, Canada, and Mexico should stop analyzing where goods are manufactured and instead consider who owns and controls these manufacturers. The Commerce Department’s Connected Vehicle Rule for cars provides a template for defining what goods have a strong connection or “sufficient nexus” to China or other non-market players.

Protecting U.S. and allied markets like Mexico, Canada, and Europe will require coordinated strategy and enforcement actions that correct for China’s corrosive non-market practices.

Susan Soh is a research associate for the Center on Economic and Financial Power at the Foundation for the Defense of Democracies (FDD). For more analysis from Susan and FDD, please subscribe HERE. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.