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China Gives Mexico Stiff Warning Over Tariffs Seen Appeasing US

(Bloomberg) -- China urged Mexico to “think twice” before levying tariffs, a warning that could signal Beijing’s willingness to retaliate over a move it sees as giving into demands from the US.

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“Any unilateral tariff increase by Mexico, even within the framework of WTO rules, would be seen as appeasement and compromise toward unilateral bullying,” a spokesperson for the Ministry of Commerce said in a statement on Thursday. “We urge the Mexican side to exercise extreme caution and consider carefully before taking any actions.”

Mexico has come under growing pressure from Donald Trump’s protectionist stance on trade, particularly his push for steep tariffs on Chinese goods. The Latin American country announced plans Thursday to impose duties of as much as 50% on cars and other products made by China and several Asian exporters.

President Claudia Sheinbaum, who’s preparing for talks over North America’s free-trade deal, later insisted she doesn’t seek conflict with China but instead wants to protect domestic industry.

China’s exports to Mexico have nearly doubled since 2016, the year before Trump started his first term in office, in part because Chinese companies moved operations there to avoid tariffs.

But it’s become increasingly difficult for countries caught in the middle between Washington and Beijing to navigate bilateral relationships with the two superpowers as the US president pushes trading partners to increase levies on China.

What Bloomberg Economics Says...

“Beijing will likely hit back with reciprocal tariffs immediately, but risks alienating partners at a time when it critically needs allies. Over time, it may also encourage firms to localize production in partner countries, though that would come at the cost of weaker output and jobs at home.”

— Chang Shu. To read the full note, click here

China runs a substantial trade surplus with Mexico. Last year it exported $71 billion more than it imported, according to China’s customs data.

Mexico accounted for about 5% of China’s copper ore imports in January to July, as the Asian nation’s smelters try to secure every ton of raw material they can in a tight global market.

While copper ore and concentrates could be a potential target for retaliation, Mexico would likely be able to find other customers given strong demand for the metal essential for the renewable energy industry.

The biggest producer of copper in Mexico is US-based Southern Copper Corp., a part of Mexican billionaire German Larrea’s Grupo Mexico.

The Ministry of Commerce spokesperson urged countries to strengthen communication and coordination “amid widespread global opposition to indiscriminate imposition of tariffs from the US,” adding that China would take necessary measures to safeguard its rights and interests.

--With assistance from James Mayger.