Mexico suddenly stopped raising taxes on China, and the reason behind it is shocking!

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Do you still remember the saying "I gave American dad 7 big mouths backhand"? That's right, the Mexican government has recently become discouraged after watching China's series of trade counterattacks against the United States with wide-eyed eyes. It originally planned to impose new tariffs on Chinese goods, but suddenly announced that it would be suspended. This is not ordinary diplomatic rhetoric, but a real strategic retreat. Data shows that China’s recent tariffs on the United States and Canada cover tens of billions of dollars in goods, including key areas such as electric vehicles and semiconductors, and the measures are swift and ruthless. When the Mexican side saw this, his heart pounded: if the same big slap hits his face, it would be no joke. After all, Mexico's economy is highly dependent on trade, and China is its second largest partner. If there is a real conflict, the consequences will be disastrous.

Mexico’s Ministry of Economy quietly issued a statement at the beginning of this month, mentioning that it would “reevaluate its tariff policy towards China” but did not give a specific timetable. This wave of operations came so suddenly that even many local media were caught off guard. It turns out that Mexico originally planned to follow the lead of the United States and increase taxes on some Chinese imported goods on the grounds of "protecting domestic industries" and "balancing the trade deficit." But the plan could not keep up with the changes, and China's tough response to the United States made the Mexican authorities completely sober. Mexican President Lopez even said privately to his advisory team: "We cannot be cannon fodder. When big countries fight, it is better for small countries to stay away." Although this kind of truth has not been said publicly, everyone can see it through policy changes.

China’s trade counterattack against the United States is no small matter. Starting in May, China announced an additional 25% tariff on electric vehicles originating in the United States and an additional 15% tariff on semiconductor products, as well as a series of fields such as agricultural products and chemicals, affecting a total trade volume of approximately US$18 billion. American companies complained endlessly, and the stock prices of giants such as Tesla and Intel fell in response. Mexican trade officials revealed privately that they studied the data in detail and found that China’s methods were not only precise but also extremely fast—it only took less than two weeks from announcement to implementation. This kind of efficiency made Mexico realize that China is not a soft persimmon at all, but a tough one.

Mexico’s trade structure is actually very fragile. China is Mexico's second largest trading partner in the world, with bilateral trade volume exceeding the US$100 billion mark in 2023. Mexico imports a large amount of electronic products, mechanical equipment, and textiles from China, which are the lifeblood of local manufacturing. If Mexico raises taxes on China, China can strike back and retaliate against Mexico's exports of automobiles, agricultural products or oil. Mexican Economy Minister Recio once publicly warned: "Any trade friction may trigger a chain reaction, and we cannot afford it." In fact, Mexico's GDP growth rate is only about 2%, but the unemployment rate remains high. If there is a real stalemate with China, the economic situation will worsen in minutes.

In the game between big powers, small countries often become pawns. Mexico is close to the United States to the north and China to the south, and neither side dares to offend. The United States has been pressuring Mexico to cooperate with the strategy of "containing China", such as reducing its dependence on China in the supply chain. But Mexico is not stupid. They know that the United States itself cannot handle China, let alone them. A Mexican diplomat anonymously revealed: "We have seen how the United States is deflated. Those slaps from China were too loud, and we don't want to try it." This kind of realism consideration directly promoted the suspension of the policy. The Mexican government now prefers dialogue to confrontation, hoping to resolve trade imbalances through negotiations rather than head-on confrontation.

Mexico’s suspension decision also reflects subtle changes in the global trade pattern. In recent years, China has won over many developing countries through the "Belt and Road" initiative and bilateral free trade agreements, and Mexico does not want to be isolated. The Chinese Embassy in Mexico also recently announced in a high-profile manner that it will increase investment in Mexico, especially in the fields of new energy and infrastructure. This strategy of using both carrot and stick makes Mexico feel that "cooperation is more cost-effective than conflict." Mexican business leaders have expressed support for suspending tax increases. They believe that the Chinese market is too big and it would be a pity to lose it. The CEO of a large manufacturing company said: "The tariff war is a lose-lose game and we cannot afford it. "

Of course, there are also objections within Mexico. Some local industry groups have complained that the dumping of Chinese goods has led to the collapse of local businesses and that the government should not back down. But the data speaks for itself – although Mexico’s trade deficit with China exists, Chinese investment has created hundreds of thousands of jobs, especially in the automotive and electronics industries. After weighing the pros and cons, the Mexican government chose to be cautious. They do not want to repeat the mistakes of the United States. After the United States increased taxes on China, prices for its own consumers rose and costs for businesses increased. In the end, it was the common people who paid the bill. Mexican economists pointed out: "Short-term protectionism may bring long-term pain, and it is wise to suspend it. "

From the perspective of international relations, Mexico's actions highlight the survival wisdom of small countries. In the struggle between China and the United States, they learned to "make food based on food". China's Ministry of Foreign Affairs spokesperson recently praised Mexico's "pragmatic attitude" and emphasized that there are broad prospects for cooperation between the two countries. This is not a polite statement. China really needs Mexico, a bridgehead in Latin America, to gain influence from the United States. Mexico takes advantage of this opportunity to reap benefits, such as seeking more investment and technology transfer. A potential trade war was resolved quietly, but only the authorities knew the tension behind it.

Mexico's moratorium won't last forever. Next, they may renegotiate trade terms with China and seek a fairer agreement. But in any case, this "scare" effect has taught the world a lesson: the deterrent power of China's trade counterattack cannot be underestimated. Other countries such as Canada and Australia are also waiting and watching, for fear of becoming the next target. There are no winners in the trade war, but the fear is real, and Mexico has proven it with its actions.