Former Official Says Mexico Uninterested in Turning Away Chinese Investment, Inputs

A former top trade negotiator in Mexico, Juan Carlos Baker Pineda, said he doesn't think the review of the USMCA will be about fine-tuning or technical changes to the trade pact.

The review, coming in 2026, is likely to be dominated by political considerations, he predicted. "We are already seeing some policy signals from Mexico and the U.S.," he said, that the review "will be taken as an opportunity to close even further the trade rules in North America."

Baker, who was speaking on a webinar hosted by Trade Winds, a program at the Peterson Institute for International Economics, was asked by host Cecilia Malmström, a former EU trade commissioner, if the golden age of trade is over, and if trade is breaking down.

Baker said that from the Mexican perspective, the answer is yes and no.

"Certainly the political narrative and some of the policy positions taken suggest an intentionality in trying to decouple and separate from trading in certain countries and certain regions," he said. But, he said, "reality is much more complex. Businesses and economic actors have not necessarily bought in entirely" that nearshoring is the way to go.

He said that while 83% of Mexico's exports go to the U.S., and 43% of its imports come from the U.S., 19% come from China, and imports, while still small, are growing from Trans-Pacific Partnership partners such as Vietnam and Malaysia; Korea and Japan are also a source of imports. Mexico doesn't have a free trade agreement with Korea, and Baker said that could be a fruitful place to start negotiations.

"Clearly, someone didn't get the memo and is continuing trading with countries that are far away, despite the logistics costs," he said. "The data from Mexico suggests trade is not necessarily becoming more regionalized."

Baker said that he thinks the tenor of conversations in the U.S., that say that China might be using Mexico as a back door to enter the U.S. market, is going to get worse.

However, he said that Mexico doesn't have the same preoccupation with China that the U.S. does.

"The reality is people don't feel China is as threatening," he said. "I believe that Mexico has the legitimate expectation to be able to trade with everyone, receive investments from everyone. "It is very difficult to say we're going to close down that door with that country because people in Washington or in Ottawa or in Brussels might be disappointed with us."

Baker said the data shows that Chinese imports are being used to manufacture high-value goods in Mexico, not that Chinese goods traverse Mexico with very little processing before being exported to the U.S.

Baker said the U.S. has already tried high tariffs, investment screening and export controls to decouple from China. He said it's hard to think "what else they will come up with, but certainly they will be very creative in that regard."

New Zealand's Deputy Secretary of Trade and Economy Vangelis Vitalis, also on the webinar, said that for small countries like New Zealand, it's clear the golden era is over. He said it's not just China and the U.S. who are diverging from the rules-based trading order, but all the major players are drifting away from World Trade Organization principles.

"We are learning that the strong do what they can and the weak suffer what they must," Vitalis said.

He said New Zealand is nervous that Donald Trump will return as president, and will implement a worldwide 10% tariff on New Zealand's imports. If, somehow, countries that have free trade agreements with the U.S., such as Australia and Chile, are exempt from that 10% tariff, that would make his country's exports so expensive by comparison that they couldn't compete in the market.

"Is Brussels going to stand by and not respond?" he asked rhetorically. "Our huge anxiety is not simply what it means for us bilaterally but what it means systemically."