Politicians and auto industry groups in the United States and Canada have stepped up their criticism of Mexico, expressing concern that the country is becoming a haven for Chinese automakers looking to avoid tariffs on North American products.
Earlier this month, Ontario Premier Doug Ford hinted that Mexico would be excluded from the Canada-United States-Mexico Agreement (CUSMA), a trilateral trade agreement scheduled for review in 2026.
Ford said Mexico is a growing concern for Chinese auto parts makers and automakers amid widespread speculation that Mexico is allowing Chinese manufacturers to set up factories in the country to avoid tough tariffs imposed by the U.S. and Canada. He said it was now a “back door.”
The United States and Canada imposed penalties on Chinese electric vehicles, steel and aluminum this year in a bid to counter China’s overcapacity and boost domestic manufacturing. Some critics say Mexico isn’t worth the tariffs. United with North American trading partners, incoming US President Donald Trump has threatened to impose additional tariffs on Mexico. mexican officials warned that the country would retaliate.
Ford’s claim regarding Mexico is that “claims have been circulating in Washington that China is redoubling its efforts to expand into North America and is eyeing every opportunity, and has been for some time.” [to do so]” Flavio Volpe, president of the Automotive Parts Industries Association, said in a recent interview with CBC. metro morning.
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President Trump has promised to impose a 10% tariff on all imports and has signaled his administration’s intention to renegotiate the terms of CUSMA (also known as USMCA). President Trump accused China of circumventing the agreement by importing auto parts to the North American market via Mexico.
According to the report, shipping container exports from China to Mexico in January 2024 increased by 60% compared to the same period last year. Analysis by maritime intelligence company Xenetathe author suggests that China may be using Mexico to avoid U.S. tariffs.
Alberta Premier Daniel Smith and Ontario Premier Doug Ford have both said Mexico should be excluded from the North American Trade Agreement and Canada should sign a bilateral agreement with the U.S. The proposal is likely to have the support of incoming US President Donald Trump.
How so-called “backdoors” work
In the United States, the Trump and Biden administrations have “used protectionism as a tool to ensure that investment in electric vehicles in particular, and in auto factories in particular, is not eroded by the idea of a backdoor,” Dimitri said. Mr. Anastakis is Professor of Canadian Business History at the University of Toronto.
How does that backdoor work? Tariffs apply to exports (for example, cars manufactured in China and shipped to North America). Imposing tariffs on exported goods can make them more expensive for consumers, creating an incentive to buy cheaper domestic options.
Under the terms of current trade agreements, countries must: reach a certain percentage Of North American content eligible for duty-free exports, 75% are automobiles and “core” auto parts. 40-45 percent of the product must be made By workers earning the minimum wage of $16 an hour.
But some believe these conditions can be circumvented through a process called “transshipment,” where raw materials from China are brought to Mexico, assembled, and the finished product is labeled as Made in Mexico, ending up in the U.S./Canada. I am concerned that products from the United States may be exempted. Tariff.
“The fear is that there will be re-importation, and that the Chinese will have a system where they can set up rudimentary facilities, like assembly facilities, and do basic, low-level content. North American content as well. It may be included, but it’s actually a sneaky way to get through the back door to avoid the tariffs imposed by Canada and the United States,” Anastakis said.
Juan Carlos Baker Pineda, Mexico’s former Undersecretary of Foreign Trade, said: quoted by BBC He said the Chinese origin of raw materials imported into Mexico “may be offensive to the policies of some countries…but according to international trade law, those products are clearly Mexican.”
Ontario Premier Doug Ford has advocated for kicking Mexico out of the North American Free Trade Agreement. Juan Carlos Baker, Mexico’s former USMCA negotiator, said Ford’s comments “do not reflect” the reality of North American trade.
Which Chinese companies are paying attention to Mexico?
some industry association and Member of Parliament He called on Canada and the United States to block the import of Mexican auto parts that originate in China, saying the move could have dire consequences for the domestic auto industry.
“The threat is [from] Parts and materials that are not produced in Mexico, and therefore may be imported through Mexico, displace investments that auto suppliers have made on this continent to manufacture goods and meet USMCA’s definition of local content. ” Volpe explained.
“This is not a growth market. Every new source of supply is an alternative source. So, for example, if you source 5 percent of those parts from China, you lose the same amount on investment doing business here. It’s probably the workforce.
a July 2024 Report The Wilson Center, a political think tank, argued that China’s attempts to access the US market indirectly through Canada and Mexico are a major concern. Hundreds of companies have started operations in North America, and China’s exports to Mexico have “significantly increased,” the report said.
“Nonetheless, other numbers show that fears of a ‘red wave’ quietly creeping into North American supply chains are overblown,” report authors Earl Anthony Wayne and Diego・Written by Marroquin Vitale. They noted that China’s foreign direct investment in Canada and Mexico is miniscule compared to the United States.
“The real concern is not the size. [Chinese] FDI in Mexico — that’s rapid growth. “Although still low compared to other countries, China’s FDI is expanding at an unprecedented rate,” Marroquín-Vitar later wrote. on X.
Chinese electric car maker BYD, like its peers Chery Automobile and SAIC, has publicly shared plans to build a manufacturing plant in Mexico. Reportedly courting state government Seek incentives (such as tax breaks and public land) to make this possible. Meanwhile, Mexico’s federal government has refused to provide incentives, citing pressure from the United States.
Chinese auto parts companies are also setting up base around Monterrey, Mexico, in hopes that Elon Musk’s Tesla will eventually build a new gigafactory there. It was confirmed that the project would be paused in the summer, with Musk saying: wait for results We announced the results of the presidential election to consider the risk of tariffs by the Trump administration, which we are currently participating in.
Professor Anastakis said automakers are slowing their EV efforts amid slowing growth and an unstable political climate, and that “one of the things the industry wants is stability.”
“With so much uncertainty and disruption, automakers will just pull out. We don’t know what’s going to happen. That’s going to have very serious ramifications.”
