China warns Mexico to ‘think twice’ before raising tariffs, threatens countermeasures

BEIJING — China’s Ministry of Commerce has warned Mexico of countermeasures as the country plans to hike tariffs on Asia-made cars to 50%.

We “hope Mexico will be extremely cautious, and think twice before acting,” the ministry said in a statement late Thursday, translated by CNBC.

“China and Mexico are mutually important trade partners,” the ministry said. “We are not willing to see both sides’ economic cooperation affected by this situation.”

Mexico’s Secretary of Economy Marcelo Ebrard told reporters Wednesday that the country planned to raise tariffs on vehicles coming from Asia, particularly China, to 50% from the current 20%. The increased duties still need Congressional approval, and the tariffs would take effect 30 days later, he said.

“China will take necessary measures … to resolutely safeguard its legitimate rights and interests,” China’s statement read.

In the ongoing trade tensions with the U.S., China’s countermeasures have included restrictions on exports of minerals critical to the production of cars and other advanced technology. Chinese companies have come to dominate the supply chain for many of those minerals.

Sitting on the southern border of the U.S., Mexico benefits from the United States-Mexico-Canada Agreement (USMCA) for tariff-free trade among the countries. But USMCA, which took effect in 2020, requires a far greater portion of a vehicle to be made in the region than the North American Free Trade Agreement agreement it replaced.

Mexico’s auto industry is the country’s largest employer, Jorge Guajardo, Washington, D.C.-based partner at Dentons Global Advisors, previously told CNBC. He is a former ambassador of Mexico to China.

From June 2022 to July 2024, more than 20 Chinese auto parts and manufacturers have announced over $7 billion in investments in Mexico, according to the Coalition for a Prosperous America, an advocacy group.

It’s unclear how many of the projects have been completed. Chinese electric car giant BYD has notably not yet built a long-awaited factory in Mexico.

The central American country has been China’s top destination for car exports, according to China Passenger Car Association figures earlier this year.

“The thing that’s very important about Chinese autos is that where they’re taking market share, a lot of times, it’s not really from the Western brands. It’s really from the other Asian brands. I think that’s what we’ve seen in Mexico,” Eugene Hsiao, Macquarie Capital, head of China equity strategy, said on CNBC’s “The China Connection” earlier this week, ahead of Mexico’s latest tariff announcement.

But even with hints of a 25% increase in duties at the time, Hsiao said that he expected “the value proposition for a lot of these Chinese cars, I think, remains intact, even with some of these tariffs.”