China Threatens Consequences After Mexico's Plan To Tax Asia-Made Cars At 50%

China has threatened Mexico with countermeasures should it formalize its plan to hike tariffs on Asia-made cars to 50%.

"China will take necessary measures," China’s Ministry of Commerce said in a statement Thursday, responding to Mexico’s plans to impose tariffs ranging from 10% to 50% on goods from nations without a free trade agreement with it, which includes China.

"Any unilateral tax increase by the Mexican side, even within the framework of WTO rules, will be regarded as appeasement (to the United States) and compromise against unilateral bullying," a translation of the statement read. China believes that such a move would harm the business environment in Mexico.

Mexican Economy Secretary Marcelo Ebrard said Wednesday that the government intends to hike tariffs on vehicles imported from Asia — especially from China — to 50%, up from the present 20%.

He added that the measure requires approval from Congress and would be implemented 30 days after authorization.

The new tariffs proposed by Mexico will also affect imports from South Korea, India, Indonesia, Russia, Thailand, and Turkey. The country's government has said the move is aimed at protecting local jobs and industry, while analysts believe that it is aimed at placating the U.S.

China could respond by restricting exports of minerals critical to the production of cars and other advanced technology, as it has done while countering U.S. tariffs, according to a CNBC report.

In the two years through July 2024, more than 20 Chinese auto parts and manufacturers have announced over $7 billion in investments in Mexico, according to the advocacy group Coalition for a Prosperous America and reported by CNBC.

So far this year, iShares MSCI Mexico ETF (EWW) and iShares MSCI China ETF (MCHI), funds tracking Mexican and Chinese stocks, are up about 39%. On Stocktwits, the retail sentiment is ‘bearish’ for both the ETFs.

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