Mexico's planned tariffs could backfire on its economy

Mexico's planned tariff increases could backfire on its own economy, with analysts warning on Friday that the move may drive up costs for domestic industries and dampen foreign investor confidence.

As media reports indicated that Mexico plans to raise import tariffs on about 1,400 items — such as vehicles, toys and steel products — from countries without free trade agreements, including China, they said the move could disrupt supply chains and increase production expenses for Mexican manufacturers reliant on competitively priced inputs.

In a statement released late Thursday, the Ministry of Commerce said China will take necessary measures to firmly safeguard its companies' legitimate rights and interests.

Amid widespread global opposition to the United States' unilateral tariffs, countries should enhance communication and coordination to jointly uphold free trade and multilateralism. The legitimate interests of third parties must not be compromised under coercion from others, said the statement.

Lyu Xiang, a research fellow specializing in foreign trade at the Chinese Academy of Social Sciences in Beijing, said, "Mexico's step, instead of really protecting local industries, could undermine efficiency, push up prices, shrink consumer options and even trigger pushback from trading partners."

In an increasingly interconnected global economy, protectionist steps may diminish Mexico's attractiveness as a destination for new investment, particularly in sectors like vehicles and electronics that are heavily integrated with international value chains, said Lyu.

Chen Bin, deputy director of the expert committee of the Beijing-based China Machinery Industry Federation, said that Mexico's move could hinder the growth of its domestic production.

"Given that most of its large businesses are joint ventures or multinational firms, Mexico's local production and innovation capacity remain underdeveloped. This has left the country reliant on Chinese components and technology to underpin its manufacturing sector, notably in automobiles and household appliances," said Chen.

A large number of vehicles and electromechanical products by multinationals in Mexico are geared toward exports, while the domestic market still depends heavily on imports from China, especially high-end equipment and parts, as well as smart devices, he added.

Urging Mexico to act with utmost caution and think twice before taking any action, the Ministry of Commerce said that such measures, if implemented, would not only harm the interests of trading partners, including China, but also erode the predictability of Mexico's business environment and dampen investor confidence.

Foreign Ministry spokesman Lin Jian said on Thursday that China opposed all forms of unilateralism, protectionism and discriminatory and exclusive measures, adding it will firmly protect its rights and interests in light of the development of the situation.

"We firmly reject moves that are taken under coercion to constrain China or undermine China's legitimate rights and interests under any pretext," Lin said at the regular news briefing.

China and Mexico are important members of the Global South and their bilateral economic and trade cooperation is win-win by nature, he said.

China-Mexico trade grew 1 percent to 456.95 billion yuan ($64.16 billion) in the first seven months, while China's imports from Mexico surged 11.3 percent year-on-year during this period, according to the General Administration of Customs.

Although it only began exporting to Mexico in February, Ningbo Qrunning Cable Co, based in Ningbo, Zhejiang province, will ship $110,000 worth of its low-voltage cable to Mexico in October and is currently negotiating the details of a deal valued at up to $5 million with a Mexican company, said Ningbo Customs.

Gao Shanshan, the company's head of foreign trade unit, said, "Once the new tariff policy takes effect, it will inevitably raise product costs and undermine our price competitiveness in the Mexican market."

This will pose major challenges to the smooth execution of subsequent orders and the long-term development of businesses in Mexico, Gao said.

Contact the writers at zhongnan@chinadaily.com.cn