Mexico Recalibrates Its Trade Policy Amid a Growing Deficit with Asia, with China at the Center of the Debate
The federal government defended the implementation of temporary tariffs ranging from 5% to 50% on imports from countries without a free trade agreement as a measure to protect domestic industry, without singling out any specific nation. However, the data reveals that the core of the imbalance lies with China. According to figures from Banco de México, the country has accumulated a trade deficit of $223.349 billion with Asia, with approximately 54% attributed to China. The gap with the Asian giant has widened rapidly over the past decade: it jumped from $60.293 billion in 2014 to $119.52 billion in 2024. Between January and October this year, the negative balance totaled $101.383 billion, with prospects to close even higher.
The pressure is felt especially hard in labor-intensive sectors. The textile and footwear industries have lost around 250,000 jobs over the last seven quarters, while steel is facing the challenge of global surpluses linked to Asia. Between 2021 and 2024, footwear imports grew by 22.3% and apparel imports by 20.8%, displacing local production. In the automotive sector, imports of light vehicles from Asian countries without agreements have surged; China accounts for 28.6% of those imports. The Ministry of Economy emphasizes that these cars do not generate productive activity or jobs in Mexico, stressing that it is a priority to safeguard the country’s place as the world’s fifth-largest producer.
The tariff shift comes at a time of increasing global protectionism and a reconfiguration of supply chains. Mexico has benefited from investment relocation to North America, but its manufacturing sector still depends on Asian inputs, from textiles and chemicals to capital goods. The normalization of shipping costs after the pandemic, the strong peso in 2023-2024, and U.S. demand have made imports cheaper, thus widening the deficit with Asia. Simultaneously, Washington has toughened its stance toward China in strategic sectors, pushing Mexico to coordinate with its USMCA partners to prevent trade diversion and reinforce customs oversight against undervaluation and triangulation.
The impact of tariffs will be uneven. For sensitive sectors—footwear, apparel, steel—they may present opportunities to regain market share and jobs if accompanied by financing, anti-smuggling efforts, and public procurement that prioritizes domestic content. However, for industries that rely on imported inputs, costs could rise in the short term. Pass-through to consumer prices appears limited if the exchange rate remains stable and domestic demand moderates, though Banco de México will stay alert to possible second-round effects. In the automotive sector, tariffs may encourage Asian suppliers to invest in plants and regional content in Mexico, but compliance with rules of origin and political sensitivities in the U.S. will shape the pace and depth of that transition.
Looking forward, the combination of temporary tariffs and nearshoring offers an opportunity to deepen local supply chains and reduce critical dependencies, provided progress is made on key enablers: adequate and clean energy, logistics infrastructure, security, regulatory certainty, and more agile customs. The USMCA review in 2026 will be a pivotal moment: aligning industrial policies with North America without violating WTO commitments will be key to sustaining investment and employment. A public policy approach that blends trade defense with improvements in structural competitiveness could help ease short-term adjustment costs and strengthen the productive base over the medium term.
In short, Mexico is adjusting its trade policy in response to a growing deficit with Asia—particularly China—and pressure from domestic sectors. The measure creates space to regain production, but also poses costs and execution challenges. Its ultimate balance will depend on the ability to attract suppliers to Mexican territory, curb unfair trade practices, and accelerate competitiveness reforms without losing macroeconomic stability or investment certainty.
