MEXICO CITY — In recent times, Mexico has faced significant criticism for supposedly acting as a route for Chinese components and products entering North America. This situation has raised concerns among Mexican officials, particularly with the prospect of a re-elected Donald Trump or a politically weakened Canadian Prime Minister Justin Trudeau potentially sidelining Mexico in the U.S.-Mexico-Canada Free Trade Agreement (USMCA).
In response to these fears, Mexico’s ruling Morena party is actively working to safeguard the trade deal. President Claudia Sheinbaum announced a strategic initiative aimed at encouraging businesses to replace their imports of Chinese components with domestically produced alternatives.
Sheinbaum stated, “We have a plan that focuses on substituting imports from China, aiming to produce most of these components in Mexico, whether through Mexican firms or primarily North American companies.”
Although Sheinbaum contends that this initiative has been in motion since the global supply chain disruptions in 2021, particularly concerning the shortage of essential parts like computer chips from Asia, the challenge remains substantial. The United States has struggled to bring chip manufacturing back to its shores despite substantial financial incentives and subsidies offered to stimulate domestic production.
As a result of the USMCA, Mexico saw a significant influx of jobs as U.S. and international automakers shifted operations to take advantage of lower wages. However, concerns about the potential infiltration of Chinese products undermining the U.S. automotive industry have fueled resentment among American stakeholders.
To address these issues, Mexico is collaborating with private enterprises to encourage local parts production. “Next year, God willing, we are going to start manufacturing microchips in Mexico,” stated Mexican Economy Secretary Marcelo Ebrard on Thursday, emphasizing that while these chips may not be the most advanced yet, production will commence.
The Morena party, which typically exhibits resistance to conforming to U.S. demands, is also taking steps to amend other regulations. This includes dismantling several independent regulatory agencies established by previous administrations, such as those focused on anti-monopoly measures, transparency, and energy oversight. This wave of changes has led to apprehension in both the U.S. and Canada.
Under the terms of the trade agreement, it is essential for countries to maintain independent agencies to protect foreign investors. These entities could prevent the government from giving monopolistic advantages to state-owned enterprises that could limit competition.
In a bid to align with the trade deal’s stipulations, ruling-party lawmakers are modifying proposed legislation to reflect the minimum requirements outlined in the agreement. Ebrard noted, “We are formulating a reform that aligns closely with what exists in the United States, to clarify that situation.”
In the legal framework surrounding the trade agreement, which was signed in 2018 and ratified in 2019, Mexico is hopeful that these adjustments will deter the U.S. or Canada from withdrawing from the deal upon its review in 2026. Experts agree that a complete withdrawal from the agreement is improbable.
Gabriela Siller, director of economic analysis at Banco Base, highlighted that if dissatisfaction arises with the trade accord during the reviews, a clause allows for annual negotiation attempts for up to a decade, preventing any quick exit. “Essentially, they wouldn’t be able to withdraw before 2036,” Siller explained. “I anticipate they will be tough in the 2026 review.”
C.J. Mahoney, who held the position of deputy U.S. trade representative during Trump’s initial administration, remarked in a recent discussion that ending the trade agreement is unlikely. However, with the rising number of critics, the process of renewing the agreement could be prolonged. “The costs of delaying renewal are relatively low, and there may be a strong temptation to postpone action,” Mahoney added.
The uncertainty surrounding the agreement might hinder companies from making significant investments in production facilities, which could jeopardize the trade pact’s stability.
How significant is Mexico’s importation of Chinese goods? Mexican authorities contend that their imports from China are lower than those of the U.S.; however, this argument is weakened by the vast economic disparity between the two nations.
In July, the U.S. instituted tariffs on steel and aluminum from Mexico that originated elsewhere, aiming to prevent China from circumventing import duties by routing products through Mexico. This initiative includes a 25% tariff on steel not melted or poured in Mexico and a 10% tariff on aluminum.
Senator Sherrod Brown from Ohio has advocated for halting Mexican steel imports, citing the “alarming rise in Chinese steel and aluminum entering the country through Mexico” as a significant concern for American jobs and national security.
Ultimately, Mexico may need to take decisive action against Chinese imports, although this will prove to be a formidable challenge. José María Ramos, a public administration professor at the Colegio de la Frontera Norte in Tijuana, stated, “Reducing reliance on Chinese imports will not be achievable in the short to medium term.”
