This article first appeared on GuruFocus.
Mexico’s decision to slap steep tariffsup to 50%on Chinese cars and other Asian goods is reverberating beyond North America. After the announcement, Beijing wasted no time issuing a pointed warning: any move that appears to accommodate US pressure, especially under President Trump’s aggressive trade agenda, would be seen as a provocation. China’s Ministry of Commerce didn’t mince words, calling it appeasement and urging Mexico to think twice. President Claudia Sheinbaum is trying to strike a diplomatic tone ahead of NAFTA talks, but markets are watching for signs of friction that could spill over into trade flows.
If China retaliates, copper could be next in the line of fire. Mexico accounted for about 5% of China’s copper ore imports from January through Julymaking it a small but not insignificant piece of China’s broader commodity sourcing strategy. Southern Copper (NYSE:SCCO), owned by Grupo Mexico, stands as the country’s dominant producer. While global demand for copper remains tightespecially with electrification and renewables driving appetitethe threat of Chinese countermeasures injects new uncertainty into SCCO’s export outlook. Even if Mexico finds alternative buyers, a short-term shock could still rattle sentiment around Larrea’s mining empire.
The larger story here isn’t just tariffsit’s supply chain realignment under geopolitical pressure. Chinese exports to Mexico have nearly doubled since 2016, largely because manufacturers saw it as a workaround to avoid US tariffs. Now, that detour looks less viable. As Bloomberg Economics points out, Beijing may lash out in the short term, but risks isolating allies it desperately needs. Longer-term, firms could be nudged to shift production closer to end marketsgood for nearshoring narratives, but another headache for China’s industrial base. In the meantime, copper, cars, and crossfire could define the next chapter in Mexico’s delicate balancing act.
