Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Mexico’s new tariff hikes alarm Korean exporters
Mexican President Claudia Sheinbaum speaks during a press conference at the National Palace in Mexico City, Mexico, Wednesday (local time). EPA-Yonhap
By Park Jae-hyuk
Concerns are mounting over the operations of Korean companies in Mexico after the Latin American nation on Wednesday (local time) approved tariff hikes of up to 50 percent on 1,463 products from Asian countries that lack a free trade agreement (FTA).
The affected products include machinery, auto parts and electronic components, which account for about 30 percent of Korea’s exports to Mexico — its largest trading partner in Latin America. Since 1993, Korea has recorded an annual trade surplus with Mexico. During the first three quarters of this year alone, Korea’s trade surplus with Mexico exceeded $12 billion.
Given Mexico’s importance for Korea’s trade, the Korean government had asked Mexico to exempt Korean products from the tariff hikes after the administration of President Claudia Sheinbaum proposed the measure in September.
At the time, the Ministry of Trade, Industry and Resources said it would continue monitoring the issue and work with industry officials to minimize the negative impact on Korean businesses. However, the ministry ultimately failed to secure exemptions for Korean firms.
To benefit from U.S. tariff exemptions under the U.S.-Mexico-Canada Agreement, Korean automakers and electronics manufacturers have set up production facilities in Mexico, which offers relatively low labor costs. They have relied on raw materials and components sourced from Korea for their final products.
Despite these business ties, negotiations on a Korea-Mexico FTA have remained stalled since talks began in 2006. While the two nations signed an Investment Guarantee Agreement in 2000, the framework does not provide tariff exemptions.
As a result, Japan, one of Mexico’s FTA partners, stands to gain a price advantage over Korea once the tariff hikes take effect.
To address rising concerns, the trade ministry said it will soon convene a meeting with business leaders to analyze the impact of Mexico’s tariff hikes and discuss possible countermeasures.
“Most of Korea’s exports to Mexico consist of components and raw materials processed by Korean companies to produce goods that are then exported to the U.S.,” a trade ministry official said.
“Given Mexico’s exemption of tariffs on imports of raw materials for export production, the proposed tariff hikes are expected to have limited impact on Korean firms operating in Mexico.”
China, meanwhile, warned that Mexico’s new tariffs would damage trade relations.
The Asian nation is expected to be most affected, as Mexico imported $130 billion worth of products from China in 2024 — second only to imports from the U.S.
“China has always opposed all forms of unilateral tariff increases and hopes Mexico will correct such unilateralist and protectionist practices as soon as possible,” China’s commerce ministry said in a statement.