Will Mexico build a China tariff wall?

By imposing a 35% tariff on textile imports, Mexican President Claudia Sheinbaum is signaling support for US efforts to counter China's influence in the region, BNamericas was told.

The tariff applies to countries with which Mexico does not have free trade agreements, so the US and Canada will not be affected. Sheinbaum announced the measure during her morning press conference on Thursday, alongside economy minister Marcelo Ebrard.

Mexico’s chief negotiator during the USMCA free trade talks, Kenneth Smith, told BNamericas that the tariff is not necessarily a weapon in the US-China trade war. “I consider it a decision independent of US pressure, but it also helps to send signals showing Mexico being stricter when tackling unfair actions from China or other countries.”

He added that the move was “more like an effort to take care of the concerns of the local industry. The US stopped protecting its textile industry a long time ago, so I don’t believe that the sector is as great a concern for them as are the automotive or the steel industries.”

The new tariffs fall into the most favored nation category and represent the lowest level a country can charge on imports from other WTO members. 

However, “we cannot ignore the fact that increasing tariffs will probably raise the prices of textiles in Mexico, which on one side can benefit local producers, but, on the other, can affect low-income consumers that largely depend on being able to buy cheap clothes,” said Smith.

Ebrard, meanwhile, claimed that “there are some companies that say they are importing products to export them, but it isn’t true and they end up selling them in Mexico. This means they can sell a finished product in the Mexican market without paying VAT, ISR [income tax] or tariffs, so the product is cheaper than that of an established Mexican company. Why should Mexican companies be at a disadvantage? This is a door we’re closing.”

According to the textile industry chamber Canaintex, Mexico loses US$3.2bn per year in taxes that are not collected from Chinese companies like Shein or Temu.