China’s Position as a Major Trade Partner
While China is the second-largest external supplier of products to Mexico, with exports totaling $119,587 million in 2024, it contributes only 0.5% of the total foreign direct investment (FDI) inflows to Mexico.
In 2024, accumulated Chinese FDI in Mexico (2006-2024) amounted to $2,792 million, representing 0.5% of the total FDI inflows to Mexico’s economy. This places China at position 19 among the main sources of FDI in Mexico, although certain flows are not attributed to China due to various reasons.
Export and Investment Disparity
China stands out for the disproportion between its FDI contributions and export volumes compared to other major partners of Mexico in Latin America. In contrast, China is the second-largest external product supplier to Mexico, with exports worth $119,587 million in 2024. This accounts for 20.3% of Mexico’s total imports, placing China second in the origin of these global purchases.
In simpler terms, China exports extensively but invests minimally in its relationship with Mexico. Chinese inputs, parts, and components enhance the competitiveness of Mexican finished goods exports but also expose Mexico to vulnerabilities in its value chain due to the reliance on certain strategic products.
To elaborate, Mexico imports crucial components in its shared production with China but does not receive substantial investments to strengthen its productive value chain.
Recent Trade Tensions
On Thursday, the Chinese government stated that it “firmly opposes any coercion” following Mexico’s plan to impose tariffs of up to 50% on imports of vehicles and other products from countries without trade agreements, including China.
By announcing that it will impose, subject to Congressional approval, the maximum allowable tariff under the World Trade Organization (WTO) on 1,463 product classifications belonging to 17 strategic sectors, the Mexican government clarified that this does not violate its international trade agreements.
Starting September 27, 2024, the United States will impose an additional tariff of 100% on imports of electric vehicles from China, along with a 25% tariff on electric vehicle batteries and critical minerals from the Asian country.
The administration of former President Joe Biden cited “extensive subsidies and non-trade practices” by China, generating substantial risks of overcapacity. The tariffs were implemented to “protect US manufacturers from China’s unfair trade practices.”
Some US stakeholders advocate for a coordinated approach in North America regarding China’s imports and investments through the joint review of the United States-Mexico-Canada Agreement (T-MEC).
Regional Trade Tensions
In August 2024, Canada announced its intention to impose tariffs on imports of electric vehicles from China. Subsequently, in September 2024, as a response to Canada’s actions, China’s Ministry of Commerce announced the initiation of an anti-dumping investigation on Canadian canola seed imports.
