Concerns are growing over Korean companies' operations in Mexico after the country approved tariff hikes of up to 50 percent on products from Asian nations without a free trade agreement. The measures affect machinery, auto parts, and electronic components, which make up about 30 percent of Korea's exports to Mexico. However, the industry ministry assessed that the impact will be limited due to Mexico's tariff reduction programs for intermediate goods.
Mexico's Senate approved tariff hikes on Wednesday (local time) for imports of automobiles, auto parts, textiles, steel, and other goods from countries without a free trade agreement, including Korea, effective next year. The plan imposes 25 percent tariffs on auto parts, 25-30 percent on washing machines, 25 percent on refrigerators, and 30 percent on microwaves. The rates were reduced from initial proposals, partly due to Korea's diplomatic efforts, including meetings between trade and foreign ministers.
The Ministry of Trade, Industry and Resources held an emergency meeting on Friday with Korean automobile, auto parts, and steel companies, stating that the hikes will have limited impact on Korean exports thanks to Mexico's tariff reduction programs for intermediate goods. Korea has maintained an annual trade surplus with Mexico since 1993, exceeding $12 billion in the first three quarters of this year alone. Mexico is Korea's largest trading partner in Latin America, serving as a key manufacturing hub where Korean automakers and electronics firms import intermediate materials from Korea to produce goods for export to North America under the USMCA.
Negotiations for a Korea-Mexico FTA have stalled since 2006, and the 2000 Investment Guarantee Agreement does not provide tariff exemptions. This gives an edge to Mexico's FTA partners like Japan. The ministry plans to convene a meeting with business leaders to assess impacts and discuss 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 warned that the tariffs would damage trade ties, as Mexico imported $130 billion from China in 2024.
