Mexico raises import tax on Chinese cars to 50%
Mexico's decision to increase import taxes on cars from China to 50% has shocked the market and opened up many economic and political debates.
Biggest tax hike in years
The Mexican government has announced plans to raise import tariffs on cars from China and several other Asian countries by up to 50%. This is part of a comprehensive reform of import tariffs, aimed at protecting domestic jobs and responding to political pressure from the United States.
Previously, the tax rate on Chinese cars was only 20%. Economy Minister Marcelo Ebrard said that without a certain tax barrier, domestic manufacturers would find it very difficult to compete when Chinese cars entered the market at prices lower than the reference price.
Affecting tens of billions of dollars in imports
The tariff hike is estimated to affect more than $52 billion worth of imported goods, including many other sectors such as steel, textiles, motorcycles and toys. Specifically, steel and motorcycles will be subject to a 35% tax, while textiles will be subject to a rate of 10% to 50%.
The plan, if approved by Congress, would affect 8.6% of Mexico's total imports and protect about 325,000 industrial and manufacturing jobs.
Pressure from the US and the geopolitical context
China's Foreign Ministry said it opposes trade restrictions imposed under pretexts. Spokesperson Lin Jian stressed that Beijing will defend its legitimate interests and hopes Mexico will work towards global economic recovery instead of imposing barriers.
Experts say Mexico’s tariff hike is tied to pressure from the United States, a country competing with China for influence in Latin America. Washington is concerned that China could use Mexico as a back door to access the U.S. market.
Meanwhile, Mexico also does not want to lose the industrial strategy that has helped the economy grow steadily over the past 30 years, while also seeking to maintain important trade relations with the United States.
Forecasting impact and controversy
Analysts say the tax hike could boost demand for Chinese cars in the short term before the regulation takes effect. But in the long term, it could help Mexico increase its revenue and strengthen its political image, especially as the country is expected to collect nearly $3.8 billion in additional taxes next year.
The US-Mexico-Canada (USMCA) free trade agreement will be reviewed next year, and Mexico's new move is seen as a strategic step to prepare for the difficult negotiations ahead.
