Mexico - January 2026

Mexico's hefty new tariffs of up to 50% on imports from countries without free trade deals – especially China – took effect on 1 January, in a move primarily aimed at protecting domestic industries from the “dumping” of cheap goods, while aligning Mexico more closely with the trade priorities of the administration of US President Donald Trump. Although local manufacturers support the measures, which they say are essential to ensure their survival, the move has fuelled significant trade tensions with China, while Mexico’s export-oriented ‘maquiladora’ sector has warned about rising production costs.

Approved by congress in early December, the bulk of tariffs will be raised to between 25% and 35%, applying to more than 1,400 products across the automotive, textiles, clothing, plastics, chemicals, steel, aluminium, and electrical equipment sectors. Products affected by the new law represent approximately US$52bn in imports, or 8.6% of the national total in 2024, according to congress. More than 70% of the imports affected by the new law are estimated to come from China, followed by South Korea (8.2%), then India and Thailand. Other countries that will be hit include Indonesia, Vietnam, Taiwan, Brazil, Turkey, Russia, the UAE, and South Africa.

The Mexican government insists that the main goal of the tariffs is to bolster domestic production while also combatting unfair trade practices, with some products sold at prices below the cost of production in their home markets, which is known as “dumping”. Officials emphasise that the measures are not directed at any particular country, despite concerns that they are effectively targeted against a surge of low-cost imports from China. President Claudia Sheinbaum stated in December: “It’s not directed at China. That’s very important. It’s directed at countries with which we don’t have a trade agreement. Because otherwise it seems like it’s an issue where Mexico is imposing trade restrictions.” 

Impact

The new tariffs are expected to have several important economic impacts - both positive and negative. Firstly, it is hoped that they will lead to a shift in supply chains, contributing to “sovereign, sustainable, and inclusive reindustrialisation”, according to Mexico’s economy ministry. Officials say that the tariffs are a central plank of Sheinbaum’s flagship ‘Plan México’, which is designed to strengthen national industry and reduce dependence on low-cost imports, regaining a more balanced economic model. By making Chinese inputs more expensive, the idea is to incentivise their local production. 

Crucially, the levies are reportedly expected to provide an additional US$3.76bn in government revenue next year, making a valuable contribution to Mexico's efforts to reduce its fiscal deficit. Officials say they will also protect as many as 350,000 jobs, mostly in the manufacturing, textiles, footwear, and automotive sectors. But economists warn that higher tariffs could have an adverse impact on inflation. As many Mexican manufacturers rely on Chinese components for their finished products, the sudden increase in input costs may lead to higher prices for domestic consumers. Calculations by local economists suggest that the impact on annual inflation could be modest – somewhere in the range of 0.2-0.3 additional percentage points. 

Nevertheless, this argument has been championed by Mexico’s major exporters, who are unified in their criticisms of higher tariffs. Humberto Martínez Cantú, president of the Consejo Nacional de la Industria Maquiladora y Manufacturera de Exportación (Index), an organisation which represents Mexico’s maquila export factories, has warned that the new tariffs and protectionist policies promoted by the Trump administration will hit the stability of the Mexican export sector and could slow industrial growth. Businesses complain that not only will higher costs for Chinese components make Mexican exports less competitive in the global market, but that the new regulations are overly complicated and do not provide a “grace period” for them to find alternative suppliers.

In contrast, Mexican companies producing for the domestic market have welcomed the new tariffs with open arms. Organisations like business lobby Confederación de Cámaras Industriales de los Estados Unidos Mexicanos (Concamin) and iron and steel chamber the Cámara Nacional de la Industria del Hierro y del Acero (Canacero) argue that the measures are essential to guarantee the survival of domestic industry. They say that without the tariffs, Mexican factories would be forced to close, as they cannot compete with state-subsidised Chinese prices. At the same time, they highlight that the tariffs are vital for protecting thousands of jobs in traditional manufacturing hubs like Puebla, Tlaxcala, and Nuevo León states.

Balancing act

For Sheinbaum, the tariffs pose a delicate geopolitical balancing act. On one hand, her administration is at pains to preserve good relations with Mexico’s largest trading partner, the US. It is widely believed that the tariffs are aimed at placating the Trump administration ahead of the review of the US-Mexico-Canada trade agreement (USMCA) this year. Mexico wants to show that it is serious about preventing Chinese circumvention of trade rules, given arguments in Washington that Beijing uses Mexico as a “back door” for Chinese goods to enter the North American market while bypassing US tariffs. At the same time, Sheinbaum's government is in talks with the Trump administration to reduce tariffs on Mexico, including 50% duties on steel and aluminium. Trump has even threatened to impose extra tariffs on Mexico, including raising an existing 25% levy on non-USMCA goods as part of Washington’s bid to strongarm countries into doing more to stop the flow of the synthetic opioid fentanyl into the US.

But China is of great importance to Mexico too. It remains Mexico’s second-largest trading partner, even if the relationship is unbalanced – China exports around US$130bn annually to Mexico but imports just US$9bn from Mexico. China is also a key source of foreign investment for Mexico: companies have been expanding their footprint there in recent years, especially in the electric vehicle sector, including brands like BYD, MG, and Chery. Other Chinese companies exposed to the new tariffs include Yutong, a trolleybus supplier in Mexico City; Xiaomi and Whirlpool in the home appliance sector; and digital platforms like Temu.

The levies will “substantially harm the interests of trading partners, including China,” according to a spokesperson for Beijing’s commerce ministry. “China has always opposed all forms of unilateral tariff increases and hopes that Mexico will correct such unilateral and protectionist practices as soon as possible,” said the spokesperson, adding that an investigation into Mexico’s trade policy was in progress.

In order to avoid retaliatory measures, Sheinbaum’s administration is working hard to reduce the friction caused by the tariffs. “We are going to have a dialogue, and it is very clear to me that they don’t like us imposing tariffs. We will be in dialogue with China and other countries. These are not political measures, they are economic and trade measures,” said Marcelo Ebrard, Mexico’s economy minister. While Sheinbaum has said that Mexico does not want to “make any enemies”, the tariffs are likely to continue to ruffle feathers in Beijing unless some sort of agreement is made with China.