Posted on 22 Jan 2025
US president Donald Trump’s proposal to impose trade tariffs on Mexico as soon as February, could hurt Chinese suppliers, Kallanish Power Materials understands.
Chinese automakers BYD, Chery and Great Wall Motor have launched production bases in Mexico. Auto parts companies Ningbo Tuopu, Zhejiang Sanhua Intelligent Controls and Ningbo Xusheng Group are producing auto parts in the country.
While the import of electric vehicles from China is already subject to a 100% tariff in the US, the new levies could also impact suppliers that import parts from Mexico to the US.
“We’re thinking in terms of 25% [levies] on Mexico and Canada, because they’re allowing a vast number of people [over the border]... I think [from] 1 February,” Trump said at his inauguration speech on 20 January.
“I will immediately begin the overhaul of our trade system to protect American workers and families,” he says. “Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens.”
Mexican auto parts are key for the US auto industry, with around 87% of its exports reportedly going to the US. On the other side of the border, Mexico is also the main source of automotive imports in the US, according to the International Trade Administration. Canada, also threatened with a 25% import tariff, is the second-largest automotive exporter to the US.
Based on the United States-Mexico-Canada Agreement (USMCA), which entered into force in July 2020, vehicles manufactured in Mexico can be imported to the US and Canada tariff-free.
The Chinese government and individual carmakers and part suppliers are yet to comment on Trump’s proposal. The move could also impact the manufacture and trade of batteries and critical minerals.
Mexican president Claudia Sheinbaum had previously warned that tariffs could affect $800 billion in annual trade between the two countries, and drive inflation in the US.
The US National Retail Federation and Consumer Technology Association has also cautioned against the imposition of tariffs, saying they would amount to a tax on businesses and consumers.
Ali Furman, consumer markets industry leader at PwC, told CNBC that unlike in his first term, Trump's new tariff policy has a wider impact, and American consumers may find it more difficult to accept price increases by retailers.
Source:Kallanish Power Materials
