Get to know possible changes in the mexican trade policy

The Future of Mexico's Trade Policy

With the recent appointment of Claudia Sheinbaum as president of Mexico, changes in Mexico’s economic and trade policies, as well as pending tasks, are foreseen. In recent years, exports have grown, and Mexico has advanced in negotiating key free trade agreements, such as the USMCA, and “attracting(?)” foreign investments. However, significant challenges have also emerged, namely the growing dependence on Chinese imports, a “concerning” trade deficit, the urgent need to renew trade agreements like the EU-Mexico Free Trade Agreement (FTA – EU – MX) and obtaining new or different tradeing partners. Furthermore, President Sheinbaum now also faces pressure from the Trump administration. 

President Sheinbaum has made it clear that she wants Mexico to become a key global player, taking advantage of new opportunities such as nearshoring and improving trade relations with other important regions. Is Mexico heading towards a future that is promising for international trade? 

Next, we will analyze how Mexico’s economy behaved during the administration of Andrés Manuel López Obrador.

I. Trade Activity in Mexico During the Last Six Years

Did trade and foreign investment changed with AMLO’s term? The reality is that AMLO’s presidency faced serious challenges, such as the NAFTA/USMCA negotiations, US-China trade war, and the pandemic. All of this factors had an impact in the trade and foreign investment statistics, as noted below.   

A. How did exports and imports behave?

In the past six years, Mexico’s trade balance[1] shows significant growth in both imports and exports, with a sharp decline in 2020 due to the COVID-19 pandemic. However, a strong recovery is observed starting in late 2020, with sustained increases in both exports and imports.

During 2022 and 2023, trade volumes reached significant peaks, reflecting a growth in trade activity. The Post-pandemic recovery. Exports, while maintaining a slight lead over imports, follow a synchronized pattern, indicating a relatively balanced trade balance.

[1] *Obtained from the Instituto Nacional de Estadística y Geografía (INEGI): https://www.inegi.org.mx/temas/balanza/

By the end of the administration, Mexico consolidated its position as an exporting power, especially thanks to its international trade programs (like IMMEX) and its trade relationship with the United States and Canada under the USMCA. However, Mexico also saw an increase in imports from countries such as China, which mainly explains our trade deficit of $4.868 billion. Did China diversify or channeled its exports as a result of the US-China trade war? 

i. Mexico-U.S. Trade Relationship.

In recent years, Mexico became the main supplier of goods to the U.S. market, displacing China for the first time in 21 years. This situation is largely explained by the trade war between the United States and China, the tariff preferences provided under the USMCA, the relocation of supply chains, among other reasons.

On the other hand, U.S. imports in Mexico have decreased as noted in the chart below. Are US imports being substituted by Chinese imports? The chart shows Mexican Export to the US (Blue Line), while US imports into Mexico (red line) (2024 data to be updated).

i. Mexico-China Trade Relationship.

The U.S.-China trade war also had another effect: the redirection of Chinese exports to Mexico. Nevertheless, the economic relationship between Mexico and China seems to be taking a different direction.

In July 2024, Ministry of Treasury Rogelio Ramírez de la O stated that the trade relationship between Mexico and China is not reciprocal. The Minister specified that Mexico buys $119 billion from China per year, but China only buys $11 billion; in other words, Mexico has a trade deficit of $108 billion. Following these recent statements, changes in foreign trade programs are foreseen that could impact established supply chains.

B. Foreign Investment

In the last six years, foreign investment in Mexico grew steadily. Since 2018, foreign investment has increased steadily from $17.842 billion to a record $31.096 billion in 2024, as shown by the following chart from the Ministry of Economy.

However, the reality is that “new” foreign investment fell by 21% over the past six years ($75.506 billion from 2013 to 2018 vs. $59.749 billion from 2019 to 2024) if we break down the types of Foreign Direct Investment according to statistics from the Ministry of Economy.

In other words, during López Obrador’s administration, foreign investment was sustained by the reinvestment of company profits (red line), while “new investments” (blue line) plummeted despite the alleged nearshoring boom.

II. What can we expect with Sheinbaum as President?

There are questions regarding the future of Mexico’s trade policy with the arrival of Claudia Sheinbaum to the presidency. Important events are approaching with the president’s entry, including USMCA’s review, or better said renegotiations as called by Trump. On the other hand, questions arise, such as what will happen with the pending conclusion of the EU-Mexico Free Trade Agreement? Below, we will explain what can be expected with the new mandate of Claudia Sheinbaum.

A. Plan Mexico: New Import Substitution Industrialization Policy?

Due to the alleged lack of reciprocity in the trade relationship between China and Mexico, the loss of competitiveness, and transportation costs in the Asian country, the Mexican government believes this is a great opportunity to reduce Mexico’s dependence on China and attract investments from different origins. Thus, an import substitution industrialization policy is being announced under the umbrella called “Plan Mexico.”

Before joining the GATT in 1986, Mexico had an import substitution industrialization policy. In practice, this policy required the importer to “ask” the then SECOFI for permission to introduce a specific way material or merchandise because there was no Mexican supplier (hence the Spanish name “pedimiento de importacion”, which refers to a petition or permision to import). This policy had to be eliminated because it was (and still is) incompatible with GATT rules as updated in the WTO.

On the other hand, the Ministry of Economy also announced plans to modify the Sectoral Promotion Programs (PROSEC) to encourage national production of certain materials and reduce Asian imports. In words, the ” import substitution industrialization ” seems to focus on eliminating tariff preferences for certain inputs listed for specific sectors of the PROSEC, which could have the effect of increasing production costs if supply sources cannot be diversified.

And as if this weren’t enough, it is reported that the textile industry is asking the new president to use “import substitution industrialization” as an SOS plan to address Chinese imports. But again, the import substitution industrialization plan translates primarily into immediate measures of tariff increases, although measures to stop imports via courier through e-commerce stores will be soon adopted. These industries are not chosen at random, as they represent a significant part of the products imported by Mexico:

Update: Measures Against Textiles

In december 2024, the Ministry of Economy raised tariffs to textile products and included a list of textile products that could no longer be subject to imports under the IMMEX program. For more information, visit our alert.

Conflicting Messages

In summary, government officials submit a contrasting scenario is presented. On one hand, in August 2024, the Ministry of Economy announced the document “Tax Incentives for Investment” highlighting the intention to promote trade and investment, including the addition of tariff items MXHTS 5402.20.02 and 5902.20.01 concerning raw materials for the textile and clothing industry that may benefit from PROSEC; on the other hand, Minister of Treasury Jesús Ramírez de la O stated that if 10% of what is currently imported from China could be produced in North America, Mexico’s GDP would increase by 1.4 percentage points.

It can be assumed that the ” import substitution industrialization ” will be the strategy that President Sheinbaum will adopt to reduce the import of Asian products into Mexican territory. To be a successful policy, it will require not only incentives but also improving competitiveness conditions, such as energy and security, among other factors.

B. New International Trade Policies

According to recent statements from Sheinbaum, the new Minister of Economy, Marcelo Ebrard, has several tasks ahead, including: the review of the USMCA and promoting development hubs

i. Update: US-Mexico

As noted, there is a risk of a “tariff war” between Mexico and USA as a result of the fentanyl crisis and organized crime, as well as the trade balance, according to the new US administration. For more information, visit our recent post regarding the tariff suspension.  

ii. USMCA Review or renegotiation?

The first review of the USMCA, scheduled for 2026, is crucial for Mexico. According to recent statements from Katherine Tai, the U.S. Trade Representative, the review will have to be uncomfortable. To make an analogy, it will be like a visit to the dentist. It is expected that the three countries address issues such as the dispute settlement mechanism, climate change, and the impact of China in their economies.

Furthermore, it should be noted that Mexico still has unresolved issues with the United States under the USMCA, such as the ban on genetically modified corn (recently revoked), the ban on glyphosate, the dispute regarding the energy policy, and the rules of origin for the automotive sector. Likewise, the U.S. has several measures or trade barriers in its sights, such as the delays in COFEPRIS health licenses, and the steel sector, among others.

Needless to say, the Trump administration is calling for a new negotiation.

iii. Development Hubs

As promised in her presidential campaign, Sheinbaum will seek to promote 12 new development hubs. These so-called “Welfare Hubs” intend to be development zones that make better use of resources, promoting investment and trade through tax incentives. However, these incentives are much lower than those anticipated for the Special Economic Zones, which never came into operation. One of the most prominent plans is the Isthmus Train, which aims to replace the Panama Canal. 

iv. European Union Mexico Free Trade Agreement

On January 2024, the Ministry of Economy and the EU Commission announced (again) the conclusion of the modernization of the European Union-Mexico Free Trade Agreement.

III. Conclusion

The future of Mexico’s trade policy under the presidency of Claudia Sheinbaum is filled with uncertainties and challenges. Some key issues, such as the renewal of the EU-Mexico Free Trade Agreement (EUMXFTA), are advancing, but others, like USMCA’s disputes, are yet to be resolved. Other pressing matters such as the Trump tariffs are creating uncertainty in the economic context. If the USMCA review or renegotiation is “intense” provoking renogotiations, further uncertainty will be added.  

The import substitution industrialization policy promises to be difficult to complete, while the question remains whether Mexico will renew high tariffs and follow a protectionist strategy. For example, will electric vehicles from China and other origins continue to be exempt from tariffs despite the intention to fight climate change? This does not appear to be the current policy. Will the basic basket food facilitation measures be renewed to fight food inflation? Nobody knows. 

Additionally, the SAT has announced stricter measures for IMMEX companies, audits, and origin verifications, adding complexity to Mexico’s value chains. In short, although the opportunities are great, the government faces numerous pending tasks and critical questions that must be addressed to ensure a stable, competitive, and fair international trade environment. 

Do you need more information?

VTZ is a Mexican Law Firm with 50 years of experience, specialized in International Trade with a strong focus on antidumping investigations. Contact our key members  today:

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