Mexico raises levies on imports as Chinese goods shut out of US hit the market
The Trump administration’s tariffs and China’s overproduction are distorting global trade, prompting other countries to impose levies on Chinese exports. (Source photos by Nikkei and Reuters)
WASHINGTON — U.S. President Donald Trump’s tariff policy and China’s overproduction are having serious repercussions on global trade, with Chinese products shut out of the American market instead flooding Europe and Southeast Asia at bargain prices.
Now these countries are taking a page from Trump’s playbook, starting to adopt or consider countertariffs as a means of protecting their own markets.
U.S. Treasury Secretary Scott Bessent had said earlier that other countries would also raise tariffs on Chinese exports, as the world would not be able to absorb China’s overproduction. His prediction is proving correct.
Mexico is set to increase tariffs on approximately 1,400 items, primarily Chinese products, to as high as 50% in January 2026. Vietnam, which saw a 23% jump in Chinese goods imports through November this year, has raised tariffs on Chinese steel since July.
Europe has also seen an influx of Chinese-made electric vehicles, prompting French President Emmanuel Macron to tell a local newspaper that “we Europeans will be forced to take strong measures in the coming months,” such as tariffs, if Beijing does not respond.
Looking at China’s trade for the January-November period, exports to the U.S. fell 19% on the year, but those to the European Union and ASEAN rose 8% and 14%. Despite the headwinds from the Trump tariffs, China’s trade surplus is on course to exceed $1 trillion for the first time in 2025.
China is dominating the global market by leveraging low prices. The unit price of Chinese-made passenger cars exported to the EU has fallen 9% over two years, while the number of exports has increased by 50%. Prices of steel, electronic components, solar panels and other products have all fallen, causing export prices to fall 17%.
Massive government subsidies are funding these price cuts. According to an analysis by an American think tank, China’s industrial subsidies amount to 5% of its gross domestic product — 10 times the ratio in the U.S. or Japan.
China’s production capacity for new energy vehicles, such as EVs and plug-in hybrids, is estimated at 36 million — twice domestic demand. China accounts for 30% of global manufacturing, but its consumption contributes only 13% to the global total. With youth unemployment remaining high at 17%, China has no choice but to continue mass exports to secure jobs.
The EU and Canada have raised tariffs on Chinese-made EVs, citing violations of World Trade Organization rules. Other countries, including Indonesia, are also considering tariffs. As the WTO fails to function, the world will continue to see countries countering Chinese overproduction with tariffs.
The U.S. goods trade deficit is certain to exceed $1 trillion for a fifth consecutive year. While the deficit with China decreased, the deficit with Mexico increased 17% and the deficit with Vietnam grew 46%. Chinese products are ultimately entering the U.S. via third countries. The rebalancing of global trade that Trump sought to realize did not happen.
Massive American consumption is to blame for the trade deficit. The U.S. accounts for 15% or so of global manufacturing, but personal consumption’s global share stands at roughly 30%. The Trump administration has made clear that it intends to keep this spending going, signing the “One Big Beautiful Bill Act” tax cut and spending bill in July to keep income tax cuts. The budget deficit has reached a staggering $1.8 trillion for fiscal 2025, turning the “twin deficits” into a chronic problem.
World trade volume continued to grow in the 2% range in 2025. But the current trade distortions pose a major risk to the global economy if left unchecked.
With a continuing current-account deficit, U.S. debt held by the public has risen to $29 trillion, putting downward pressure on the dollar. The 2008 Lehman shock was caused by distortions in the balance of payments, and current imbalances will only worsen.
Trade imbalances pose threats to global politics. U.S. tariff policies and China’s price collapse are directly linked to unemployment in Europe and Asia. If populist policies take hold and countries turn their backs on globalization, the world will miss a chance to correct trade imbalances through cooperation.