Trade Policy

Up to 35%! North American Power Imposes Tariffs on 185 Products from China

     On April 23, 2026, Mexican President Claudia Sheinbaum officially signed and published the "Decree Amending the General Import and Export Tax Tariff and the Various Industry Promotion Programs" in the Official Gazette of the Federation. The policy took effect the following day, April 24, imposing import tariffs on 185 tariff lines, with rates set at six levels: 5%, 10%, 15%, 25%, 30%, and 35%. The maximum tariff rate reaches 35%, with no specified expiration date.

 I. Policy Background and Legal Basis

     This tariff adjustment is not an isolated event but rather a continuation and escalation of Mexico's trade protection policies since 2024. Previously, Mexico had initiated temporary tariff measures in April 2024, which were originally scheduled to expire on April 22, 2026. The new decree converts some of these protective measures into long-term arrangements, aligning with the legislative reform of the General Import and Export Tax Law completed in December 2025.

     The Mexican government states that this tariff imposition is implemented under the emergency trade powers granted by the constitution, aimed at protecting domestic industries and maintaining economic stability. From a legal perspective, the post-adjustment tariff rates do not exceed Mexico's bound tariff ceiling commitments within the World Trade Organization, leading Mexican authorities to believe this action complies with international trade rules.

II. Core Content of the Tariff Adjustment

 (A) Scope of Application

     This tariff adjustment primarily targets countries that have not signed free trade agreements with Mexico. The affected countries include China, South Korea, India, Vietnam, Thailand, Indonesia, Russia, Turkey, Brazil, the United Arab Emirates, and South Africa. Meanwhile, FTA partner countries such as the United States, Canada, and the European Union can still enjoy preferential tariff rates subject to compliance with rules of origin.

     The essence of this arrangement is a trade policy of liberalization within North America while erecting high barriers externally, representing an important part of North American supply chain restructuring under the USMCA framework.

(B) Covered Industries and Tariff Rates

     This tariff adjustment covers multiple sectors including chemical products, cosmetics, paper and paperboard, textiles, steel, printed graphic products, aluminum products, automotive parts, electrical materials, bicycles, musical instruments, and furniture. Among these, cosmetics, printed graphic products, and bicycles are included as key protected industries for the first time.

     In the area of cosmetic raw materials, products such as monoethanolamine and diethanolamine face tariffs of up to 35%. For printed products, items including globes and architectural design blueprints similarly face tariffs of up to 35%. In the bicycle sector, non-motorized bicycles and their components are subject to a uniform 35% tariff.

     In the automotive parts sector, chassis face a 25% tariff, bus bodies for transporting more than 16 passengers face a 35% tariff, and other automotive parts and accessories face tariffs of up to 35%. Additionally, wind power generation equipment has been newly included in the tariff scope at 5%, while trailers and parachutes (including paragliders) face a 35% tariff.

(C) Further Expansion in the Automotive Parts Sector

     Notably, the legislative reform in December 2025 had already imposed tariffs ranging from 7% to 36% on various automotive parts under Chapter 87. The new decree further expands the scope of tariffs, adding chassis (25%), bodies for transporting more than 16 passengers (35%), bumpers and their components (10%), windshields and rear windows (10%), as well as other vehicle parts and accessories (35%).

III. Policy Motivations: The Political and Economic Logic of North American Supply Chain Restructuring

     The multiple motivations behind this tariff adjustment merit in-depth analysis.

     First, serving the USMCA review is the core background for this tariff imposition.Mexico's action comes as the 2026 USMCA review process is about to commence. The United States has long expressed concern that Mexico might serve as a "back door" for Chinese manufacturers to access the U.S. market, particularly in the electric vehicle and automotive parts sectors. By raising tariffs on non-FTA partner countries such as China, Mexico intends to signal a "supply chain decoupling" to the United States, thereby securing stable preferential access to the North American market.

     As Mexican Economy Minister Marcelo Ebrard stated: "Eighty-five percent of Mexico's exports to the United States currently enjoy zero-tariff treatment, the most favorable position among all U.S. trading partners." Maintaining this advantage during the USMCA review will depend in part on Mexico's ability to convincingly demonstrate its supply chain separation from China — precisely the signal this new tariff regime intends to send.

     Second, protecting domestic industries is Mexico's direct consideration.Mexican authorities claim that products from China and other countries enter the Mexican market at unfairly low prices, impacting domestic industries. Ebrard cited an example: Chinese steel enters Mexico at $150 per ton, which allegedly reflects state subsidies and below-cost structures that Mexican producers cannot compete with. Similar situations exist in the automotive sector, where some Chinese vehicles are reportedly priced below inventory costs — a practice believed capable of forcing any market-priced competitor out of business.

     Furthermore, this action has raised controversy over whether it violates WTO most-favored-nation commitments. Zhou Mi, a researcher at the Chinese Academy of International Trade and Economic Cooperation, pointed out that Mexico's discriminatory tariff policies between FTA and non-FTA partners undermine the most-favored-nation treatment commitments it should fulfill as a WTO member. From an economic impact perspective, tariff increases will directly alter the supply costs of production factors in Mexico, affecting both final consumer goods and raw materials needed by enterprises investing and operating in Mexico, thereby influencing corporate investment and operational decisions.

 IV. China's Responses and Countermeasures

 (A) Diplomatic Statements

     In response to Mexico's tariff measures, a spokesperson for China's Ministry of Commerce stated: "China consistently opposes various forms of unilateral tariff measures and hopes Mexico will promptly correct this misguided protectionist approach." Foreign Ministry spokesperson Guo Jiakun also noted: "Going against the tide of economic globalization and engaging in protectionism will only hurt oneself while harming others."

 (B) Trade and Investment Barrier Investigation

     Notably, China's Ministry of Commerce launched a trade and investment barrier investigation against Mexico in late September 2025, which is currently ongoing. On March 25, 2026, China's Ministry of Commerce formally determined that Mexico's relevant import tariffs constitute trade and investment barriers, reserving the right to take countermeasures.

     According to the Ministry of Commerce's investigation, the affected Chinese export volume exceeds $30 billion annually, with the electromechanical industry alone expected to lose approximately $9.4 billion and the automotive industry about $9 billion. The investigation also found that Chinese automotive and textile enterprises reported being disproportionately targeted during USMCA rules of origin certification reviews, with Mexican customs authorities demanding detailed documentation regarding supply chain arrangements involving Chinese components, and some enterprises' goods being detained at Mexican ports for weeks or even months without justifiable cause.

 (C) Potential Retaliation Risks

     Analysts point out that China is Mexico's second-largest trading partner, with bilateral trade volume of approximately $139.7 billion in 2024, of which Mexico imported $129.8 billion from China. Mexico's manufacturing base — from consumer electronics to automotive supply chains — is deeply dependent on Chinese inputs. If China were to adopt retaliatory measures against Mexican exports (primarily concentrated in electronics, minerals, and intermediate industrial goods) or restrict Chinese investment in nearshoring projects, this would bring substantial economic costs to Mexico.

V. Impacts and Recommendations for Chinese Foreign Trade Enterprises

 (A) Direct Impacts

     First, the traditional "Made in China - Export to Mexico - Re-export to the United States" pathway is obstructed. The conventional model of using Mexico as a gateway to the U.S. market now faces higher costs and compliance risks. Under USMCA rules, products must meet regional value content requirements (75% regional content for passenger cars and light trucks) to enjoy tariff-free treatment in North America. Even if Chinese-manufactured products are assembled in Mexico, without compliance with rules of origin, they will face a 25% tariff when exported to the United States.

     Second, costs for Chinese-invested enterprises in Mexico are rising. Both Chinese raw materials needed for production and imported final consumer goods will see cost increases due to tariffs, directly affecting the competitiveness of Chinese-invested enterprises in Mexico.

     Third, pressure for localized production in Mexico is increasing.To circumvent tariff barriers, some Chinese enterprises may be forced to consider establishing factories in Mexico or cooperating with local partners to maintain preferential access to the U.S. market by complying with USMCA rules of origin.

 (B) Recommendations

     First, reassess export strategies toward Mexico.Enterprises should closely monitor subsequent adjustments to Mexico's tariff policies and reassess the cost structures and market competitiveness of their exports to Mexico.

     Second, review rules of origin compliance. For products entering the U.S. market via Mexico, enterprises are advised to conduct rules of origin analysis to confirm whether their products comply with USMCA rules of origin, thereby avoiding 25% tariffs at U.S. ports of entry.

     Third, pay attention to supply chain restructuring trends.The trend toward "de-Chinaization" of North American supply chains is increasingly evident. Chinese enterprises should actively diversify their market presence and reduce dependence on any single market.

     Fourth, utilize WTO dispute settlement mechanisms. The Chinese government has referred Mexico's measures to the WTO framework. Enterprises should monitor the progress of subsequent dispute resolution to protect their legitimate rights and interests.

VI. Outlook

     Mexico's imposition of tariffs on 185 products marks a further elevation of North American trade barriers. Against the backdrop of the upcoming USMCA review, Mexico's strategy of strengthening external barriers in exchange for preferential internal access is likely to continue.

     For Chinese enterprises, the traditional pathway of "Made in China — Export to Mexico — Re-export to the United States" faces unprecedented challenges. Going forward, how to find new positioning amid North American supply chain restructuring, and how to enhance product value added through technological upgrading and brand building, will be key to determining whether Chinese enterprises can navigate this transformation successfully.