China’s Growth in Jeopardy: Mexico’s Tariff Move Signals a New Trade Crisis with the US
China Risks Growth Setback as Mexico Joins US in Trade Crackdown
By Bob Mason | Published August 28, 2025, 03:41 GMT+00:00
China’s economy faces more strain this quarter. Mexico now plans tariffs on Chinese goods, and the US stays firm with its own tariffs. These moves may stop Beijing from hitting a 5% GDP growth target by the end of 2025. The actions add a new side to long-standing US-China trade tension. They may cut trade routes and slow export activity.
Mexico’s Tariff Plans Amplify Trade Pressures on China
The US and China set a pause in their trade war but keep high tariffs. The US holds around a 55% tariff on Chinese imports. At the same time, China keeps a 10% tariff on American goods. China has so far sidestepped a proposed 145% tariff on goods sent directly to the US. Yet, the US now uses a plan that touches other nations by taxing goods that pass through them.
Mexico now will raise tariffs on products from China. Mexico plays an important role in China’s auto industry, serving as a key place for manufacturing and export. Chinese car makers like BYD, Chery, and MG Motors have spent over $700 million in Mexico. New tariffs on Chinese exports to Mexico, mixed with the existing US tariffs on imports from Mexico, may cut interest for Chinese car parts and vehicles meant for North America.
Mexico stands as the top source of US auto imports. This fact makes the trade route very important for China’s auto market.
Potential US Influence on Mexico’s Trade Policy
Observers note that US trade rules work not only on China directly but also on nearby nations. In July, the US set a 40% tariff on goods that travel via Vietnam and a 19% tariff on Indonesian products. Such taxes have touched Chinese exports that go through Southeast Asia. Even as Chinese exports grew 7.2% in July with help from demand in Southeast Asia, these taxes might hit future trade numbers.
Mexico’s tariff move comes after reports that the US government is thinking about tighter rules on goods that do not come directly. These rules may make it hard for China to send its products around existing tariffs.
Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis, said, "Rerouting will be much harder in the second half [of 2025]. That will hit Chinese exports indirectly. The government has been working on plans for a tougher period ahead."
Trade Talks and Market Responses
Trade barriers have grown as China and the US prepare for new talks. China’s main trade negotiator Li Chenggang will soon travel to Washington to discuss steps that may shape ties between the two nations.
Even with these strains, Beijing backs its policies. Mainland China’s stock indices – the CSI 300 and the Shanghai Composite – reached year-to-date highs before a drop on August 27. On that day, the CSI 300 fell by 1.49% and the Shanghai Composite dropped by 1.76%. Both indices later regained ground on the morning of August 28 with increases of 1.19% and 0.58%, respectively. They have outperformed the US Nasdaq Composite in 2025, though they still follow Hong Kong’s Hang Seng Index, which has risen 24.8% this year.
Market watchers now focus on upcoming economic reports. They await the National Bureau of Statistics’ private sector Purchasing Managers’ Index (PMI) on August 31 and September 1. These surveys will show if tariffs are weighing on China’s manufacturing sector. If the PMI numbers show a drop, new government aid plans from Beijing might help push the stock market higher.
Looking Ahead: Economic Headwinds and Policy Responses
China must now balance outside press with its goal for steady growth. The nation’s use of indirect trade routes has softened the impact so far. But Mexico’s rising tariffs and new rules on goods passing through third countries now cut that protection.
The outcome of the upcoming US-China trade talks and any new plans from Beijing may decide if China keeps its growth pace in 2025 or must adjust its targets.
For ongoing updates on China’s trade policies and market trends, readers can monitor real-time reports and consult economic calendars provided by FXEmpire.
About the Author:
Bob Mason has over 28 years of experience in the financial industry, covering currencies, commodities, and equity markets with a focus on European and Asian economies.
This article is intended for informational purposes and should not be taken as financial advice. Readers are encouraged to conduct their own research before making any investment decisions.
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