Mexico has recently decided to increase tariffs on apparel imports, a move that is going to fundamentally alter global trade.
Earlier in December, President Claudia Sheinbaum announced increases of 15% for textiles and up to 35% for finished apparel products.
Days later, Mexico’s tax authority SAT introduced new tariffs targeting goods entering Mexico via courier services from countries without trade agreements, such as China, imposing a 19% duty.
These measures aim to protect Mexico’s domestic textile industry while curbing imports from China.
The changes also end long-standing loopholes used by US e-commerce companies to avoid tariffs, such as the IMMEX program, which allowed goods to enter the US duty-free via Mexico.
With these new policies, Mexico is reshaping its role in global supply chains, forcing companies to reconsider their nearshoring strategies.
Every new trade policy could affect all other countries engaging in global trade, so how could Mexico’s move affect the rest of the world?
Why tariffs are increasing now?
Mexico’s tariff hikes serve multiple purposes.
First, they protect the domestic textile industry by discouraging cheaper imports.
Second, they position Mexico as a stronger ally to the United States in its efforts to reduce reliance on Chinese goods.
By closing the IMMEX loophole—once a gateway for duty-free goods to bypass US tariffs—Mexico also indicates the country’s willingness to move toward greater trade accountability.
Since the 2017 US-China trade war began, Chinese imports to the US have fallen, while imports from Mexico have increased.
Mexico has capitalized on its proximity to the US and favorable trade agreements, such as the USMCA, to establish itself as a manufacturing hub for US-focused companies.
However, these new tariffs could complicate the flow of goods between the two nations.
Who is affected the most?
The apparel industry faces immediate disruption.
Brands that relied on nearshoring to Mexico to avoid US tariffs must now explore costly alternatives.
The IMMEX program had enabled companies to label goods as “Made in Mexico” under US customs, allowing them to bypass tariffs on Chinese products.
With this loophole gone, US e-commerce companies are scrambling to find new solutions.
Chinese e-commerce companies may also take a hit.
Shein and Temu, known for offering inexpensive goods to Mexican consumers, will now face higher costs and operational hurdles.
Previously, goods under $50 were often exempt from duties, but now even low-value items from non-treaty countries are taxed.
Many company’s CEOs are voicing their concerns over the recent changes, saying that this is going to cost more money for them and they cannot afford to wait and see if tariffs get postponed.
Some companies may opt to reshore operations back to the US, but this comes with significant costs.
Others might pivot to sourcing components and materials from other regions, potentially leading to a reconfiguration of supply chains.
Understanding Nearshoring’s rising challenge
The timing of Mexico’s tariffs is particularly striking given the growing trend of nearshoring.
Over the past few years, Mexico has benefited from US companies shifting production away from China to avoid tariffs and reduce supply chain risks.
From January to August 2024, trade between China and Mexico rose 22% year-over-year, building on a 33% increase in 2023.
This trend turned Mexican cities like Monterrey into major industrial hubs, attracting investments from global companies like Volvo, John Deere, and Bosch.
Source: CNBC
However, Mexico’s new tariffs could deter further nearshoring growth.
The changes may push companies to reevaluate whether Mexico remains the best alternative to China.
While Mexico’s proximity to the US offers unmatched logistical advantages, the increased costs from tariffs could make other regions more attractive.
Trump’s tariff threats: bluff or real?
The return of Donald Trump to the White House is only adding to the uncertainty.
Trump has already threatened to impose 25% tariffs on all goods entering the US from Mexico and Canada, throwing Mexican manufacturers into limbo.
Companies like Mazda and Honda are holding off on investments until Trump’s policies become clear.
Trump’s rhetoric suggests a renegotiation of the USMCA, with a focus on limiting Chinese investments in Mexico.
Under current rules, Chinese companies can manufacture in Mexico and qualify for duty-free access to the US market as long as they meet North American content requirements.
Last year, Chinese companies invested $3.77 billion in Mexico, triple the amount seen before 2020.
Trump’s policies could target this influx, particularly in industries like autos and apparel.
Mexico’s opportunity to redefine its role in global trade
Despite these challenges, Mexican businesses remain optimistic.
Many experts believe that the US-Mexico economic ties are too strong to be severed by tariffs.
Mexico’s new tariffs also open doors for growth and innovation.
By protecting its domestic textile industry, Mexico has a chance to develop a more self-sufficient manufacturing ecosystem.
The move could encourage foreign companies to deepen their investments in local production capabilities, strengthening Mexico’s value in global supply chains.
Moreover, as businesses seek alternatives to China, Mexico remains one of the most logical options.
Its proximity to the US, skilled labor force, and trade agreements like the USMCA provide a strong foundation for growth.
With the right policies, Mexico could use this moment to solidify its position as a leader in nearshoring, attracting companies eager to reduce dependency on China while tapping into North America’s integrated supply chains.
However, there is also the risk of alienating foreign investors who have driven its economic growth.
Monterrey, for instance, has become a hub for global manufacturing, attracting $23 billion in foreign investment in 2024.
Nevertheless, businesses are hedging their bets.
Many Mexican companies are reducing their reliance on Chinese components and seeking North American suppliers to preempt potential US trade restrictions.
The current uncertainty may feel like a disruption, but it is also an opportunity for Mexico to show the world what it can offer.
The post How Mexico’s tariff policies are impacting global trade routes appeared first on Invezz
