This article first appeared on GuruFocus.
Analysts say Mexico’s newly approved tariff package could introduce fresh uncertainty for Asian exporters, with potential implications for auto makers including BYD (BYDDY). Lawmakers voted Wednesday evening to impose tariffs ranging from 5% to 50% on more than 1,400 products from Asian countries without free trade agreements with Mexico, with the measures scheduled to take effect next year. The bill passed the Senate with 76 votes in favor, five against and 35 abstentions, and will cover a broad range of goods from clothing and metals to auto parts, with Chinese imports expected to face some of the steepest increases.
President Claudia Sheinbaum said the tariffs are intended to encourage local production and protect industries such as automotive and textiles, while stressing the policy does not specifically target China and also applies to countries including South Korea. The move comes amid sensitive trade talks with US President Donald Trump and aligns with broader US concerns over Chinese exports and transshipment, even as Sheinbaum has denied a direct link. Mexico’s finance ministry estimates the new levies could raise nearly 52 billion pesos, or about $2.8 billion, in additional revenue next year, though manufacturers dependent on inputs from China, India and South Korea have cautioned that higher costs could possibly feed into inflation.
Within autos, analysts note the legislation sets tariffs on Chinese-made vehicles at up to 50%, among the highest in the package, at a time when China’s auto sector has expanded to roughly 20% of Mexico’s market from minimal levels six years ago. Mexican officials and local auto associations have backed the measures to protect domestic production, while China’s commerce ministry said it hopes Mexico will reverse what it described as unilateral and protectionist practices and added it would monitor the impact. China ran a $71 billion trade surplus with Mexico last year, according to customs data, and while potential retaliation remains uncertain, some observers suggest Mexico could redirect exports such as copper ore to other buyers amid strong global demand linked to renewable energy.