Amid rising diplomatic tensions with the US, Mexico’s diplomatic and financial relations with China look like going from energy to energy.
Earlier than we get to the meat of this story, a fast primer on the place relations between the US and Mexico presently stand.
Over the previous few years, Mexico has clashed repeatedly with the US over a litany of points, from USAID and NED’s funding of home political opposition teams to Washington’s makes an attempt to forestall Mexico from banning GMO corn for human consumption; to Mexico’s refusal to assist undertaking Ukraine or US-EU sanctions towards Russia regardless of concerted stress; to presidential candidate Donald Trump’s threats to ship kill groups to Mexico to take out the nation’s drug kingpins — a risk that shouldn’t be taken evenly given US-Mexican historical past.
The irony is that as tensions have risen between the 2 neighbours, enterprise has by no means been higher. As a consequence of altering international commerce patterns and nearshoring methods, Mexico has change into the US’ greatest buying and selling companion, as the quantity of products the US buys from its southern neighbour has surged previous these of China and Canada. Exports to the US from Mexico have elevated 20 percent-plus yearly between 2020 and mid-2024 whereas exports from China have steadily fallen, in line with knowledge cited by CNBC.
Finish of an Period
On the finish of this month, Mexico’s President Andrés Manuel López Obrador (aka AMLO) will depart politics, a minimum of formally talking. In Mexico, presidents are restricted to a single six-year time period in workplace, referred to as the sexenio, and AMLO’s is because of expire on September 30. In October, he’ll depart for his Tabasco ranch, “La Chingada“, with approval scores of as much as 76%. He has additionally secured legislative approval for his judicial reform bundle, which opens the best way to sweeping constitutional reforms on vitality, mining, housing, labour and indigenous rights, amongst different issues.
This has all occurred regardless of fixed US meddling in Mexico’s political affairs over the previous half yr. As readers might recall, the US Drug Enforcement Company interfered immediately in Mexico’s common elections by spreading unsubstantiated claims throughout Western media that AMLO’s 2006 electoral marketing campaign had been part-financed by the Sinaloa drug cartel. As we reported on the time, the DEA continues to be smarting on the strict limits AMLO’s 2020 Nationwide Safety Regulation imposed on the actions of overseas intelligence businesses like itself on Mexican soil.
Then, a couple of weeks in the past, the US and Canadian Ambassadors warned that Mexico’s proposed judicial reforms, which embody the direct election of judges — one thing that already occurs in lots of US states — may have dire penalties for the US-MCA commerce settlement. AMLO’s response was to: a) ignore the threats; and b) put Mexico’s relations with the 2 ambassadors on maintain.
At roughly the identical time, the DEA kidnapped Ismael “El Mayo” Zambada, a long-elusive Sinaloa cartel capo, and shipped him to the US to face trial. In response to the Mexican journalist Anabel Hernández, who has been accusing AMLO of ties to drug cartels for months, the US desires Zambada to rat out “a president of Mexico.” It’s not arduous to guess which one. Even on this yr of 2024, Washington continues to make use of the Battle on Medication as a method of toppling and even extraditing and incarcerating Latin American leaders or navy figures.
In final Thursday’s morning press convention, a visibly rankled AMLO accused the US authorities of appearing unilaterally in seizing Zambada and of infringing Mexican sovereignty within the course of. He additionally blamed the DEA for creating an influence vacuum in Sinaloa and the all-too-predictable explosion of gang violence that has adopted in its wake. The company, AMLO stated, had kicked over a hornet’s nest. He then requested a query many have been asking for years, if not many years:
The place are the US’ drug cartels?
“How are all these medication distributed” as soon as they attain the US, AMLO requested. “How is it that we by no means hear of the US’ well-known cartels and capos? We by no means know who they arrest (on their facet of the border)? That info by no means reaches us.”
Mexico-China Relations
Amid diplomatic tensions with the US, Mexico’s diplomatic and financial relations with China look like going from energy to energy.
When the DEA accused AMLO of receiving cartel cash a couple of months again, Mexico’s president responded by holding a two-and-a-half hour assembly with the Chinese language ambassador. In that assembly, AMLO expressed his gratitude to Beijing for its assist throughout tough instances for the nation, such because the class 5 hurricane that devastated Acapulco in late October in addition to all the fabric support Beijing despatched in the course of the COVID-19 pandemic.
Only a few weeks in the past, the Chinese language authorities urged the US to surrender its antiquated Monroe Doctrine, as Washington intensifies its meddling in Mexico, Venezuela and Honduras. In reply to a query from International Instances, Chinese language International Ministry spokesman Lin Jian stated:
China firmly helps the simply place of Latin American international locations on opposing overseas interference and safeguarding their nations’ sovereignty. The US mustn’t flip a deaf ear to the respectable issues… of Latin American international locations… We urge the US to discard the outdated Monroe Doctrine…, cease its unilateral actions of bullying, coercion, sanctions and blockades, and develop… mutually helpful cooperation with regional international locations based mostly on mutual respect, equality and non-interference in one another’s inside affairs.
“Non-interference in one another’s inside affairs” is a notion that little doubt appeals to a rustic like Mexico that has suffered a number of US and European navy incursions and invasions since gaining independence from Spain in 1810. Mexico Metropolis is even residence to a Nationwide Museum of Interventions, which I visited a few weeks in the past. Housed within the former Monastery of San Diego Churubusco, which was used as a makeshift fort in the course of the US military’s invasion of Mexico Metropolis in 1847, the museum provides an enchanting journey down a darkish collective reminiscence lane.
On its partitions are maps of the Mexico that existed earlier than the US invaded and seized possession of over half the nation’s territory between 1846-8. Among the many many episodes of historical past recounted is that of the San Patricios, a navy unit within the US military consisting of tons of of immigrants of Irish and German Catholic inventory who defected en masse to the Mexican military in the course of the US invasion. After combating with distinction in quite a few battles, a lot of the San Patricios perished or had been captured in the course of the Battle of Churubusco. Lots of those that had been captured had been tortured and executed as traitors.
This can be a story that’s little identified even in Mexico although it’s extensively commemorated. Within the US it’s, presumably, forgotten historical past. The victors of Colonial wars and their descendants have the luxurious to overlook the crimes of the previous; the losers far much less so. Quite the opposite, they’ve a duty to recollect.
Rediscovering the “International South”
A few weeks in the past, Mexico’s embassy in Beijing held an occasion to commemorate 214 years of Mexican independence. Qiu Xiaoqi, particular consultant of the federal government of China for Latin American Affairs, stated on the occasion that “below the management of the brand new authorities headed by Dr Claudia Sheinbaum Pardo,” Mexico is predicted to “proceed to realize nice success alongside its path of unbiased and autonomous growth” in addition to develop its worldwide affect.
“China and Mexico, each necessary members of the International South and enormous creating international locations with important affect, firmly adhere to their respective unbiased growth paths in line with their very own nationwide situations, firmly uphold worldwide justice, and lift a robust voice to safeguard the respectable rights of creating international locations within the worldwide enviornment,” Qiu emphasised.
It’s a message that dovetails neatly with Mexico’s newfound curiosity within the International South, as expressed by the nation’s International Minister Alicia Bárcena eventually yr’s UN Common Meeting.
That is historic. On the UN, Mexico 🇲🇽 said clearly: “Mexico belongs to the International South, certainly, by means of historical past and conviction”.
It referred to as to “strengthen the negotiating place of the International South”, and introduced it’s rejoining the G77+China.
Mexico left the G77 in 1994,… pic.twitter.com/TcvM7bjrmh
— Ben Norton (@BenjaminNorton) September 28, 2023
“Every thing signifies that Mexico and China will proceed on the trail of cooperation, dialogue and friendship — a want clearly expressed by Claudia Sheinbaum, who in 19 days will start her capabilities as the primary lady president within the historical past of my nation,” the Mexican ambassador to China, Jesús Seade Kuri, advised the delegation of scholars, navy figures, businessmen and Chinese language lawmakers gathered at Mexico’s embassy in Beijing.
“Win-Win Cooperation”
“China and Mexico are complete strategic companions and shut pals in win-win cooperation and customary growth… the pragmatic financial and commerce cooperation between the 2 international locations has introduced tangible advantages to our respective peoples,” stated Qui who, was China’s ambassador to Mexico between 2013 and 2019.
And that financial and commerce cooperation is rising quick. New knowledge revealed by Mexico’s Economic system Ministry reveals that bilateral commerce between the 2 international locations elevated 12.3% yr over yr within the first half of 2024. This current surge in commerce consolidates China’s place as Mexico’s second most necessary buying and selling companion, accounting for 20% of the North American nation’s complete imports, up from 15% in 2015.
The commerce quantity between China and Mexico exceeded $100 billion for the primary time final yr. In fact, most of that consists of Chinese language imports flowing into Mexico, lots of that are then used to assemble merchandise destined for the US market. In July, for instance, worldwide gross sales from Mexico to China had been US$649M, whereas worldwide purchases reached US$11.4B. Mexican imports of Chinese language items are up roughly 100% within the npast ten years and greater than 500% since 2006.
Chinese language funding in Mexico can be rising quickly, as Chinese language corporations search to benefit from the US’ nearshoring technique by establishing store in Mexico. The sectors most affected embody photovoltaic vitality, 5G communications, aerospace expertise and biomedicine.
Globally, Mexico is the tenth largest vacation spot for Chinese language exports, representing 2.4% of the entire. Granted, lots of these exports don’t stay in Mexico. The US’ imposition of tariffs on items from China corresponding to photo voltaic panels, electrical automobiles and EV batteries have led to transport prices rising by round six instances, in line with an current editorial in China Each day. In consequence, many Chinese language corporations have opened operations in Mexico, profiting from the nearshoring pattern:
“While you’re producing commodity merchandise, and transport prices rise that a lot, your product is now 15 to twenty % increased. So, I feel it turns into increasingly enticing to fabricate in Mexico as we proceed to face these challenges,”… [Tom Melchiorre, president of Direct Link USA, a joint venture of Fuling Plastics, a Chinese company that sells plastic straws and cups to the likes of McDonalds, Wendy’s and Dunkin’, told China Daily].
Mexico’s exports to the US final yr surpassed China’s for the primary time in twenty years, a growth linked to the political tensions between China and the US. Nevertheless, the commerce relationship between China and the US is resilient, even below strained situations.
Researchers analyzed the evolution of the trilateral commerce relationship between Mexico, the US and China from 1993 to 2020, and located that, usually, for each 1 % enhance in Mexico’s exports to the US, Mexico’s imports from China elevated by 1.06 %.
Rising Demand for Chinese language-Made Automobiles
In Latin America, Mexico is now the primary marketplace for China, even surpassing China’s fellow BRICS member Brazil. In addition to assembly the calls for of nearshoring, this desire can be because of Mexico’s burgeoning homegrown demand for Chinese language-made digital merchandise, cell phones and, most lately, cars. In 2019, near one-fifth of Mexico’s imports in electronics corresponding to cell phones, auto elements and motor automobiles got here from China, sectors the place the US was historically the primary provider, in line with Americas Quarterly.
As Wired journal reported in late August, Mexico is now the second largest marketplace for Chinese language cars worldwide, behind solely Russia:
Led by the automaker BYD, China has established itself as the primary automobile provider in Mexico. The US worries China may use Mexico as a “again door” to sidestep tariffs and acquire footing within the US market.
Prevented from promoting their wares to the US because of tariffs, Chinese language EV producers have explored different markets to promote their high-tech automobiles. Nevertheless, as Mexico establishes itself as a key marketplace for Chinese language electrical automobiles, officers in Washington worry that Mexico might be used as a “again door” to entry the US market.
That tariff-free entry is a part of the US-Mexico-Canada Settlement (T-MEC), an up to date model of the North American Free Commerce Settlement that, as of 2018, eradicated tariffs on many merchandise traded between the North American international locations. Below the treaty, if a overseas automotive firm that manufactures automobiles in Canada or Mexico can exhibit that the supplies used are regionally sourced, its merchandise may be exported to the US just about duty-free.
In response to official figures, 20 % of sunshine automobiles offered final yr in Mexico had been imported from China, representing 273,592 items and a 50 % enhance in comparison with 2022. At present, a lot of the automobiles imported from China come from Western manufacturers which have established manufacturing crops in that nation, corresponding to Common Motors, Ford, Chrysler, BMW, and Renault.
Chinese language manufacturers corresponding to MG and electrical automobile producer BYD are additionally having fun with bumper gross sales, with many Mexicans lured by their aggressive costs. BYD markets its Dolphin Mini mannequin in Mexico for round 398,800 pesos (about $21,300 {dollars}), a bit over half the value of the most cost effective Tesla mannequin. Earlier this yr BYD solely had six dealerships in Mexico, certainly one of which is simply not far away from my father-in-law’s condo within the south of Mexico Metropolis, nevertheless it plans to have 50 (with a presence in all of Mexico’s 32 states) by the top of the yr.
As demand for electrical automobiles grows, BYD has even unveiled plans to construct an EV plant in certainly one of three Mexican states (Durango, Jalisco, or Nuevo Leon), regardless of the US authorities’s current imposition of 100% tariffs on Chinese language-made electrical automobiles. The corporate insists that the manufacturing unit’s output could be solely geared toward Mexico’s home market.
Nevertheless, a few weeks in the past, rumours started circulating that BYD had put its plans on maintain, simply as Tesla had carried out with its proposed Mexican “giga-factory”. Citing “folks accustomed to the matter”, Bloomberg claimed that the Chinese language automaker, like Tesla, had determined to attend to see the result of the US election earlier than making a agency dedication. The story was rapidly picked up by media inside and outdoors Mexico, earlier than being categorically denied by BYD executives.
“BYD has not postponed any resolution on a manufacturing unit in Mexico,” Stella Li, government director of BYD Americas, stated in a press release. “We proceed to work to construct a manufacturing unit with the very best technological requirements for the Mexican market, not for the U.S. market, nor for the export market.”
Interoceanic Hall
One other space that shall be fascinating to look at over the approaching months and years is the circulation of investments into Mexico’s southern areas because the Isthmus of Tehuantepec Interoceanic Hall nears completion. Launched in 2020, the undertaking is a $4 billion endeavour geared toward revitalising a 186-mile railway line connecting the ports of Coatzacoalcos on the Gulf of Mexico and Salina Cruz on the Pacific Ocean.
The railway line, along with freeway expansions, important port enhancements and a community of business parks dotted alongside its route, goals to deal with freight site visitors of as much as a million containers yearly. Coming at a time when the Panama Canal is grappling with water shortages, this megaproject has the potential to remodel international commerce routes in addition to cement Mexico’s place as a key participant in worldwide commerce.
However who shall be investing most? As Forbes reported final yr, whereas the hall is of important strategic significance to Washington’s commerce safety plan for provide chains, it’s Chinese language buyers which might be pouring funds into Mexico’s infrastructure initiatives, together with its Mayan Prepare route, the Dos Bocas refinery in AMLO’s residence state of Tabasco and quite a few ports.
Connectivity between the 2 nations is additionally on the rise. Along with reopening direct flights between Beijing and Mexico with Hainan Airways and between Shenzhen and Mexico with China Southern, a 3rd route from Shanghai is deliberate. Additionally, to assist meet the rising calls for of surging bilateral commerce, China COSCO Delivery lately launched its “Dalian Port to Mexico” container categorical service. Till now, items exported from the China’s North-Japanese hinterland to Latin America needed to be transshipped by means of the Busan port in South Korea, stated Li Xiaoguang, common supervisor of Dalian Container Terminal Co.
“The brand new route saves greater than 10 days in comparison with the normal transshipment mannequin, considerably decreasing time and logistics prices for enterprises, and establishing a secure and handy new logistics channel between the Northeastern hinterland and Latin America,” Li stated.
China to Mexico container commerce was up by 26.2% from January to July 2024, after rising by 33% in 2023, in line with knowledge from freight analytics agency Xeneta . The month of Could, specifically, recorded essentially the most containers from China into Mexico, with June solely a few hundred containers shy of Could quantity.
A Advanced “Trilateral Relationship”
The trilateral relationship between China, Mexico and the US is exclusive on the planet in the present day. The US and Mexico share the world’s most often crossed border and after 30 years of NAFTA and USMCA, their economies are tightly coupled. China and Mexico should not simply commerce companions however direct rivals vying for the customized of the world’s largest client market, which is attempting to wean itself off Chinese language merchandise. Mexico has thus far emerged as the biggest beneficiary of the US’ nearshoring technique, however the extra it exports to the US, the extra it must import from China. And that’s the last item the US desires.
Over the previous yr, the US has escalated its disagreement towards each China and Mexico over the illicit fentanyl commerce that’s killing tens of 1000’s of US residents a yr. However as AMLO has repeatedly argued, the US authorities has spectacularly failed to handle the basis causes of drug habit inside its borders. As a substitute, some US lawmakers and pundits have proposed utilizing navy pressure on Mexico’s sovereign territory, with or with out Mexico’s permission, to fight drug cartels.
The Biden Administration’s current imposition of tariffs on Mexican metal that features Chinese language elements was an indication, if ever wanted, that the trilateral relationship was about to get much more difficult.
In April, Mexico’s authorities, below stress from the US, introduced tons of of “short-term” tariffs on imports from international locations with whom it doesn’t have a commerce settlement. The tariffs had been imposed on 544 imported merchandise, together with footwear, wooden, plastic, electrical materials, musical devices, furnishings, and metal, and vary from 5% to 50% in dimension. That they had one clear goal in thoughts: imports from China, Mexico’s second largest commerce companion, although the phrase “China” shouldn’t be talked about as soon as within the decree.
“The outdated wealthy man on the town, the US, is having issues with the brand new wealthy man on the town, China,” stated Enrique Dussel of the Centre for China-Mexico Research on the Nationwide Autonomous College in Mexico. “And Mexico — below earlier administrations, and this one — doesn’t have a technique vis-à-vis this new triangular relationship.”
And that is senseless given the chance Mexico runs of being caught in the course of this titanic duel between two international superpowers, one in ascendance, the opposite in decline. However in line with AMLO, Mexico has little selection within the matter:
We can not shut ourselves off, we can not break up, we can not isolate ourselves. It’s a incontrovertible fact that we’ve 3,800 kilometers of border, for causes of geopolitics (presumably in reference to the US’ invasion, occupation and appropriation of greater than half of Mexico’s territory within the mid-Nineteenth century). With all due respect, we’re not a European nation, nor are we Brazil. We’ve this neighborhood and, moreover, if we agree on issues, as we’ve carried out, we can assist one another out… Our financial integration is already nicely superior.
As we famous on the time, though the AMLO authorities ended up yielding to US stress, Washington’s more and more aggressive tone relating to Mexico-China relations elicited uncommon criticism within the Mexican enterprise press. The web monetary newspaper Expansión.mx featured a fiery op-ed from Jonathan Torres, a former editorial director for Forbes Media LatAm, titled “US to Mexico: You’re In opposition to China or In opposition to Me”:
Since 2022, US officers Janet Yellen (Treasury Secretary), Jake Sullivan (Nationwide Safety Advisor) and Katherine Tai (Commerce Consultant) have repeatedly reiterated that the China risk is likely one of the most delicate dangers of their nationwide safety technique, a lot in order that they’ve deployed a spread of measures to forestall Chinese language investments from coming into their territory, together with by means of their buying and selling companions. Studying between the traces, the message is blunt: “you’re with me in my technique towards China or, in any other case, you’ll undergo penalties by way of commerce, funding, and so forth.”
The US, given these circumstances, shouldn’t be essentially trying on the nearshoring phenomenon in the identical means as the remainder of the world… For the Biden administration, international provide chains are strategic however solely below sure situations; that’s, so long as they don’t threaten US nationwide safety. In different phrases, what the US is admittedly is “safety shoring,” not nearshoring.
The irony is stark: the superpower famed for its promotion of the (NC: so referred to as) free market is making an attempt to impose its personal laws on buying and selling with China on third international locations. In Mexico, for instance, the Chinese language automotive business is quickly accumulating market share and subsequently finds itself within the crosshairs of the US authorities.
There isn’t a dispute, says Torres: “We face an unlawful act.”
Tensions between the 2 USMCA companions might be about to accentuate even additional. Within the coming weeks or months, the dispute over Mexico’s proposed ban on GM corn for human consumption shall be settled. If the arbitration panel votes within the US’ favour, as tends to occur, Mexico should withdraw the ban, which may quickly be enshrined within the nation’s structure, or face stiff monetary penalties.
Each US presidential candidates are speaking about introducing extra moderately than fewer tariffs on Chinese language-produced items. Donald Trump has even threatened to impose a ten% tariff on all Mexican items coming into the US and a 200% tariff on Mexican-made automobiles, making them “unsellable”, if he wins the election. In fact, coming from Trump this might be pure electoral bluster. But when he does comply with by means of on the risk, it may plunge Mexico right into a recession as early as 2025 whereas additionally fuelling inflationary forces within the US, in line with Moody Analytics.
Confronted with such a baptism of fireside, Mexico’s incoming President Claudia Sheinbaum may reply by imposing like-for-like tariffs on Mexico’s imports of US merchandise, which might intensify inflationary forces in Mexico whereas doing little to melt the impression of Trump’s tariffs. Or she may permit the peso to depreciate to blunt the tariff impression and thus keep away from a larger-scale tariff battle. No matter occurs, one factor is obvious: managing Mexico’s relations with its two largest commerce companions goes to be a hell of a balancing act within the months and years forward, particularly if the US continues to escalate its commerce battle with China.
