A friend recently asked how to interpret Mexico's recent trade maneuvers. Frankly, these actions cannot be ignored.
First, China-Mexico bilateral trade is highly significant. Second, Mexico's actions could set a dangerous precedent in international relations. Minor trade disputes often foreshadow larger storms, and this warrants close attention.
However, rest assured—China has a well-prepared response. Based on precedent and case analysis, China has at least three strategic countermeasures ready.
It's important to note that China has exercised considerable restraint toward Mexico's actions thus far. But restraint should not be mistaken for tolerance. Some analysts suggest China's measured response reflects "great-power forbearance"—not weakness, but a deliberate buildup of strength. Calmness does not mean inaction; it means waiting for the right moment. By prioritizing diplomacy before action, China retains flexibility for future steps.
Yet, Mexico's actions remain disappointing. Despite being heavily influenced by the U.S., Mexico continues to follow its lead—including imposing steep tariffs on Chinese goods, a move widely seen as an attempt to curry favor with Washington.
This trade dispute has been brewing since August 2023, when Mexico's president signed a decree raising most-favored-nation tariffs on 392 product categories—including steel, aluminum, and chemicals—to as high as 25%, effective until July 31, 2025. The measure excluded U.S., Canadian, and EU goods, directly targeting non-free-trade partners like China, South Korea, and India. The abruptness of the move led to international criticism, labeling it a "tariff ambush."
Mexico later sought to institutionalize these tariffs, submitting a broader proposal in September 2025 to hike duties on around 1,400 items (10%-50%). After pushback from China and concerns over economic fallout, Mexico’s Congress passed a revised version on December 10, slightly lowering some rates—a small but notable concession.
However, the bill’s passage still codifies high tariffs against non-FTA partners as long-term policy.
China’s response has been measured but escalating. After Mexico’s initial 2023 tariff hike, China’s Commerce Ministry urged restraint on September 14, 2023, emphasizing that higher tariffs would raise production costs and hurt consumers. The appeal, grounded in economic logic, reflected China’s goodwill and commitment to stable bilateral ties.
But Mexico remained unmoved.
By September 2025, as Mexico pushed forward with legislation, China shifted from rhetoric to action. On September 25, the Commerce Ministry announced a trade and investment barriers investigation into Mexico’s proposed tariffs, citing violations of WTO rules. This marked a transition from diplomatic appeals to legal action.
On December 11, 2025, following Mexico’s congressional approval, China’s stance hardened further. The Commerce Ministry warned that the tariffs would "substantially harm trade partners like China" and condemned them as "unilateralist and protectionist." It vowed to "take all necessary measures" to protect Chinese companies based on the investigation’s findings.
So, what’s next for China?
A three-tiered counterstrategy is likely:
1. **Legal & Multilateral Response**: China could escalate its WTO case against Mexico’s tariffs, seeking dispute resolution or bilateral negotiations.
2. **Trade Countermeasures**: China may impose anti-dumping or anti-subsidy duties on select Mexican imports, targeting key exports for maximum impact.
3. **Investment & Supply Chain Adjustments**: China could issue investment risk warnings, redirecting or slowing manufacturing investments in Mexico—a blow to Mexico’s industrialization ambitions. Additionally, ongoing or planned joint projects may be recalibrated to send a clear message.
In closing, three observations:
1. **Don’t Misjudge China’s Restraint**: Mexico (and others) should not mistake China’s patience for weakness. Forbearance allows room for correction but also builds leverage.
2. **The Battle Isn’t Over**: Mexico still has time to reconsider. Will it escalate trade tensions or work with China toward a resolution? The choice will shape Mexico’s economic future.
3. **A Cautionary Tale for Mexico**: As the saying goes, "Mexico’s tragedy is being too far from God and too close to the U.S." Short-term opportunism often leads to long-term costs.
History shows that actions have consequences—and in trade, what goes around comes around.
*The views expressed here are personal and do not represent any institution.*
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