Beijing has warned Mexico to think twice before moving ahead with a plan to raise tariffs that could hurt Chinese automakers, saying it would retaliate against the measure.

“At a time when the U.S.’s abuse of tariffs has sparked widespread global opposition, countries should strengthen communication and coordination to jointly safeguard free trade and multilateralism, and must not sacrifice the interests of third parties due to coercion,” a Chinese commerce ministry spokesperson said in a statement released late Thursday.

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Any unilateral tariff increase by Mexico would be seen as appeasement and compromise with “unilateral bullying,” the spokesperson said, adding that China will take necessary measures to safeguard its rights and interests.

Earlier this week, Mexico announced a plan to hike tariffs on imports of key goods from countries with which it doesn’t have a trade agreement as part of efforts to bolster domestic production and substitute imports from Asia. If passed, the proposal would affect around $52 billion worth of imports, including autos, steel, textiles, toys, home appliances and footwear, according to the Mexican government.

Mexican officials couldn’t immediately be reached for comment.

Among the countries that don’t have a trade agreement with Mexico, China stands out as one of the biggest exporters. Mexico is a major consumer of Chinese-made cars, which accounted for around a fifth of new car sales in the country.

Chinese investments have poured into Mexico over the past years, ballooning bilateral trade. However, a flood of Chinese exports is also threatening Mexico’s efforts to advance its economy toward high-end manufacturing, and the Mexican government is under growing pressure from President Trump to take a protectionist stance over trade.

Mexico is in a tricky spot as so much of its economy is reliant on exports to the U.S., said Joe Mazur, senior analyst at Trivium China. If forced to choose, it probably sees U.S. tariffs as a bigger economic threat than any retaliation from China, he added.

Beijing too is facing a dilemma.

“If they don’t do anything or not do something strong enough, it will set a precedent where it’s alright for the U.S. to effectively pressure third countries to sell out China’s economic interests; but at the same time, if they retaliate too forcefully, they are put in a position where they will be spooking other trade partners,” the analyst said.

It remains unclear what action Beijing could take.

In Mazur’s view, “the way China responds to Mexico could serve as a template for future retaliation against third countries that are seen to be harming China’s interests at the behest of the U.S.”

Write to Singapore editors at singaporeeditors@dowjones.com

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