Starting this Tuesday, April 23rd, the Government of Mexico will begin increasing tariffs by 5 to 50% on manufactured steel and aluminum products from China and countries that do not have a trade agreement.
The Official Gazette of the Federation (DOF), through the Ministry of Finance and Public Credit, as well as the Ministry of Economy, published that “…it is convenient to establish temporary tariffs, ranging from 5% to 50%, on the importation of goods classified in 544 tariff items related to steel, aluminum, textiles, clothing, footwear, wood, plastic and their manufactures, chemicals, paper and cardboard, ceramic products, glass and their manufactures, electrical equipment, transportation equipment, musical instruments, furniture, among others, in order to provide certainty and fair market conditions to sectors of the national industry facing vulnerability situations, derived from practices that alter and affect international trade and thus promote the development of the national industry and support the domestic market.”
The document highlights that, for example, steel products with a diameter less than 14 millimeters will be subject to a tariff of 50 percent. Meanwhile, tires will have a tariff of 35%, and “filler” wire for arc welding, of common metal, 25 percent.
Mexico is not the first country to increase or impose tariffs on China, India is also doing so and the European Union is studying some restrictions for the Asian country.
In response, Carlos Palencia, director general of Index Nacional, mentioned that Mexico’s increase in tariffs imposed on China and other countries are part of the initiatives that the country must address in what is right and what needs to change, so that the next formal review of the USMCA in 2026 remains favorable for the Mexican economy.
“The USMCA is not going to be canceled (…) because it is known that stability depends on it. And that… Not only, not only for attracting investment or not, which new investment is arriving or for profits, but also for the net inflow of foreign currency because it is the only thing generating foreign currency for you right now. Well, remittances too, but those are not budgeted, let’s call them fluctuating and depend on work in the United States. But this is the basis of its stability policy, the USMCA.
According to Palencia, this action by the Mexican government could be a preemptive move so that the United States does not impose tariffs on Mexico, and he mentioned that, given the relocation of more Chinese companies in Mexico, the USMCA is a benefit for these Asian companies, which would take advantage of the treaty.
In this scenario, “Mexico would only be a springboard for China to reach the United States and compete with them locally now (what is in the Official Gazette of the Federation has to do with this concern),” he added.
For Palencia, the imposition of these tariffs is the beginning of a series of measures that may already be becoming clear on the part of the Mexican government towards China and influenced by the United States (as some analysts have already indicated).
He also added that one of the factors that the United States will begin to review in products coming from Mexico will be the incorporation of content in electrical components, as it would be an indicator of Chinese imports on Mexican soil.
After the pandemic, where companies are seeking to relocate their supply chains to be closer to production plants or customers in the United States, coupled with the trade war that both powers have, China is looking for ways to locate more companies in Mexico and thus be closer to the US economy (and with much less tariff burden).
It is worth mentioning that the tariff measures came into effect starting today, Tuesday, April 23, and will be valid, at least, for a period of two years, counting from the publication date.”
