Caught Between US Pressure and Domestic Defense: "No Evasion Allowed" - Mexico's Practical Solution to Chinese Imports

1. What Happened: Reports Suggesting "Tariff Enhancement"

In late August 2025, multiple media outlets reported that the Mexican government plans to include a policy to raise tariffs on imports from China in its 2026 budget proposal. The targeted categories are broad, including automobiles, textiles, and plastics, and some reports suggest that it could expand to other Asian countries. At present, no official final decision or tax rates have been confirmed, and there remains the possibility of revisions during the upcoming parliamentary submission and deliberation process.

A frequently cited trigger for this move is the strong pressure from the United States. The Trump administration emphasized strengthening the supply chain within North America and has been increasingly wary of Mexico as a "loophole for Chinese products." If Mexico raises tariffs on Chinese imports, it could politically serve as a **"goodwill signal"** aligning with U.S. demands.

2. "Fortress North America" and USMCA Re-evaluation: Pressure from the Timeline

In 2026, the six-year review of the USMCA (United States-Mexico-Canada Agreement) is scheduled. The United States is poised to thoroughly examine rules of origin, investment and subsidies, digital taxation, and the degree of dependence on China. The significance of Mexico announcing tariff enhancement at this timing is considerable. Demonstrating a reduction in procurement from China as part of the "Fortress North America" initiative could become a card in the re-evaluation negotiations.

Additionally, following the expansion of expenditures in 2024, Mexico's fiscal deficit is widening. The tariff increase is also expected to have a secondary effect of securing revenue. However, tariff revenue is highly variable depending on the economy and import volume. It is important to note that it is limited as a stable source of fiscal revenue.

3. The "Quiet Era of Tariffs" Has Already Begun

In recent years, Mexico has applied tariffs ranging from 5% to 50% on various items from non-FTA countries (such as textiles, footwear, steel, chemicals, glass, and wood products). Chinese-made EVs and automobiles are increasingly subject to tariffs of about 15% to 20%, and there is a gradual strengthening of customs and taxation for cross-border e-commerce. The current "additional" tariff speculation against China can be reasonably seen as an extension of this strengthening.

4. Who Benefits and Who Suffers

• Potential Beneficiaries
  • Domestic Manufacturers (Steel, Textiles, Furniture, Auto Parts)

    : A thicker price buffer helps deter dumping and underreporting. In the medium to long term, there is room for positive effects on capital investment and employment maintenance.

  • Companies Integrated into the North American Supply Chain

    : The incentive for production return that meets **rules of origin compliance (USMCA adherence)** is heightened.

• Potentially Affected Parties
  • Consumers

    : It is difficult to avoid price increases in items such as automobiles, home appliances, clothing, and daily necessities. There is concern that the initial cost of Chinese brand EVs will rise, slowing the pace of adoption.

  • Investment Plans from China

    : There will be a recalculation of investments in finished vehicles and parts in Mexico and the model of assembly in Mexico → export to the U.S.. Factoring in political risks with the U.S., decisions on investment freezes or delays may be made.

  • Cross-border E-commerce

    : The price advantage of companies like SHEIN and Temu is compressed. With stricter customs and higher tax rates, the appeal of **"affordable even in small quantities"** diminishes.

5. The Automotive Sector as a Canary: The "Pricing Formula" of BYD and Other Chinese Players

Mexico is said to have become the largest export destination for Chinese cars in 2025. Sales of BYD and Chirey have surged due to their low prices × well-equipped features, but if tariff enhancement becomes a reality, restructuring of pricing will be unavoidable. Tariffs add to the cost of goods, and if price increases lead to a drop in demand, the leverage of sales volume will reverse.

On the other hand, if the local production and procurement ratio is increased and the design is switched to meet USMCA rules, the impact of tariffs can be mitigated. However, under today's "meticulous rules of origin" that even consider software origins and battery raw materials, neither costs nor supply chains can be easily restructured. The message effect of tariff increases as an entry barrier is significant.

6. Reactions on Social Media: Divided into Three "Voices"

Regarding the tariff enhancement speculation, discussions on social media generally fall into three categories.

1. Industry Defense Advocates: From industry and policy stakeholders, voices like "necessary to protect jobs and added value" and "reasonable as an anti-dumping measure" are heard. Posts and statements from industry groups call for strengthening regional cooperation, considering the headwinds from U.S. tariffs.

2. Consumer Burden Concern Advocates: Economists and users highlight concerns about "inflationary pressure" and "regressivity affecting low-income groups." There are sensitive reactions to price increases of Chinese brand EVs and clothing and the shaking of the "easy affordability" of cross-border e-commerce.

3. Geopolitical Risk Avoidance Advocates: From the perspective of international politics, it is evaluated as a realistic choice aligned with "USMCA re-evaluation" and "the U.S. administration's hard stance on China." Many view the reduction of dependence on China as positive, under the slogan of "Fortress North America."

※ Specific examples (excerpt, summary):

• The Mexican Automotive Industry Association (AMIA)

  posted on X, calling for dialogue and cooperation in response to the chain of U.S. tariffs (summary).

• Economist Gabriela Siller mentioned the rise in China's import share → price pressure and issued a warning about the tightening of customs and taxation.

• A BYD fan group shared views incorporating next year's price increase, sparking active discussions about purchase timing.

※SNS shows temperature differences across local languages and communities, with timelines characterized by a **"two-tiered"** movement of

consumer perspectives (price increase concerns) and industrial and diplomatic perspectives (protection and alliance management)

.

7. Impact on Consumers: Prices, Inventory, Choices

In the short term, the pattern is often to keep prices unchanged for products in stock and revise prices for the next incoming batch. For automobiles, due to their connection with annual improvements and model year changes, price increases are likely to come with a lag. For clothing and miscellaneous goods, the pricing logic of cross-border e-commerce → small parcel delivery is easily disrupted, and the total amount of shipping, taxes, and fees may visibly rise.

On the other hand, if there is a recovery in the market share of domestic manufacturers and foreign companies in Mexico, the nature of competition will change. The focus will shift from price competition to non-price factors such as delivery times, after-sales service, and brand reliability. In the long term, the question will be whether wage and productivity improvements can be combined to create a thicker domestic demand.

8. Policy Considerations: Three Design Points

1. Subdividing Target Items: Even within the same "textiles" category, the price elasticity and employment contribution differ between raw materials→ yarn→ fabric→ sewn products. The optimal tariff for each supply chain stage is key.

2. Provisional Measures × Evaluation Loop: Every six months to a year, measure the effects using indicators of prices, employment, and investment, and tune to the appropriate level. Avoid overprotection → loss of competitiveness.

Stricter Customs and Digitalization
3. : As a measure against

   underreporting and HS code switching, strengthen AI risk scoring and customs data linkage. Design a system where honest parties are not disadvantaged.

9. Implications for Japanese Companies

Mexico is a

key hub in the Japanese supply chain

. The

strengthening of tariffs against China forces a reevaluation of component origin determination and BOM redesign. The review of the localization rate, compliance risks of third-country → Mexico bypass, and price revisions for cross-border e-commerce all have significant practical impacts on Japanese companies. A comprehensive reorganization of procurement, logistics, and taxation is required, centered on **"North American optimization."**

10. Future Sc