Who and which sectors will suffer the most from Mexico’s new tariffs targeting Asia?

While the US has reached trade agreements with most Asian markets, Mexico has reignited the tariff war by imposing up to 50% import duties. These tariffs may be related to Trump’s intention to push away Chinese exports (directly or indirectly through other Asian countries) from Mexico to the US before renewing the US-Mexico-Canada Agreement (USMCA).On the macro level, exports to Mexico from Asia remain mild. China and South Korea are affected more given the size of trade with 2.4% and 2.7% of exports. Automobiles and steel will be hit the most, but an important point is batteries are not on the list.For China, the exposure is mainly in automobile, affecting 2.9% of auto parts and 5.5% of vehicle exports. Mexico has emerged as the second-largest export market for Chinese carmakers. Chinese firms will likely absorb tariffs with domestic deflation. Still, it can affect supply chains as China’s auto exports likely target Mexican consumers rather than third markets like the US.On the surface, it looks like South Korea will be hit more, with the main effects on 4.6% of auto parts and 6.5% of steel exports. But it can mitigate the impact through existing tariff exemptions to export final products from Mexico, especially to the US. FDI from South Korea to Mexico amounted to $12.5 billion between 2018 and H1 2025, doubling the $6.1 billion from China. For the rest of Asia, India’s auto exports stand out with an exposure of 7.8% to Mexico, including production from Volkswagen, Hyundai, etc.Mexico’s actions will likely provoke China’s retaliation. Given Mexico's small share of exports to China, reciprocal tariffs will not be significant. What is more likely and impactful is that the Chinese government may advise its firms to hold off on investment in Mexico and introduce export controls.The latest round of Mexico's tariffs suggests that the US trade deals do not mark the end of trade tensions. Indeed, the global concerns about China's overcapacity and competitiveness will continue to fuel industrial policies and trade protectionism. The US reciprocal tariffs have opened Pandora's box, and more is to come from other countries in 2026. Firms will need to be prepared to be kindly invited, if not forced, to localize production in exchange for market access.