In an attempt to figuratively poke Donald Trump and the United States in the eye, Canadian Prime Minister Mark Carney just announced that Canada is cozying up to China by slashing tariffs on imported Chinese EVs. The new tariff rate will be just 6.1 percent, opening up his country to 49,000 Chinese vehicles initially, and increasing to 70,000 in the coming years. China “reciprocated” by dropping the tariff on Canadian canola oil to 15 percent. Carney’s determination to strike a deal with China clearly put the Chinese in a very favorable negotiating position. It would behoove Mr. Carney to have a talk with Mexican President Claudia Sheinbaum about the perils of economic surrender to China, especially as it relates to Chinese auto imports. (RELATED: Carney Cozies Up to China)
At almost the exact moment that Carney was capitulating to China, Mexico was implementing draconian new tariffs against China, largely in response to China’s practice of dumping its glut of vehicles into the Mexican market.
The auto industry is Mexico’s largest employer, providing about 350,000 jobs. Those jobs are suddenly in peril as Mexico is being flooded with inexpensive vehicles manufactured in China. The market share of Chinese vehicle sales in Mexico has exploded, from under 10 percent in 2021 to over 20 percent by 2023, and is still rising. (RELATED: Tariffs Have Created the Monster We Feared)
According to a recent Automotive Logistics report, through the first nine months of 2025, China’s auto exports continued to grow by double-digit percentages, and Mexico is its biggest export market.
To grasp the magnitude of China’s market share grab, the total number of new vehicles sold in Mexico in 2025 is estimated to be about 1,500,000. Through the first nine months of 2025, China had already exported almost 500,000 vehicles to Mexico, with estimates of another 100,000 being shipped to Mexico by the end of 2025, bringing the full-year total up to about 600,000 units, or equal to 40 percent of annual Mexican new car sales volume. (RELATED: America’s Trade Deficits Are Not Innocuous)
Despite all the global chatter about Chinese electric vehicles, the vehicles being dumped in Mexico (and other countries) are overwhelmingly gasoline-powered internal combustion (“ICE”) vehicles, not EVs. In fact, it is the growth of EVs in China’s domestic market that is necessitating the export surge of ICE vehicles to developing countries like Mexico.
Allowing Chinese vehicles into a market is not “free trade.”
As reported in a Reuters article from last month titled “China floods the world with gasoline cars it can’t sell at home,” China has been subsidizing the country’s electric vehicle industry for both domestic sales and to gain market share in Europe’s government-mandated EV market space. As EV manufacturing has rapidly increased, China chose not to let its legacy ICE manufacturers suffer, so it subsidized them too, creating an immense glut of government-subsidized ICE vehicles that continue to be produced. Eight of the 10 largest Chinese vehicle exporters are manufacturers of gasoline-powered vehicles. (RELATED: Celebrating the End of EVs)
Even worse, many of the Chinese auto manufacturers are state-owned. SAIC (Shanghai Automotive Industry Corporation), which has the largest Mexican market share of Chinese auto companies, is owned by the Chinese government.
With Mexico being flooded with Chinese cars, the trade gap between the two nations has veered dramatically in China’s favor. As reported by a Mexico News Daily piece from last August, through just the first six months of 2025, Mexico had imports from China exceeding $62 billion against just $4.6 billion of exports to China. The full-year trade deficit is expected to be around $120 billion. This is almost quadruple the trade deficit of 10 years ago.
Trade with China has become so one-sided and so out of balance that an overwhelming majority of Mexican legislators from across the political spectrum voted to impose harsh tariffs on China to protect Mexican labor and the businesses that employ the workforce. President Sheinbaum signed the legislation into law in late 2025. Effective Jan. 1, 2026, the new tariffs went into effect on more than 1,400 product categories from countries with which Mexico does not otherwise have trade agreements prohibiting such tariffs. The tariffs range from 5 percent to 50 percent, with a special impact on Chinese vehicle imports, for which the tariff is increasing from 20 percent to 50 percent.
It’s also relevant that the USMCA trade agreement between the United States, Canada, and Mexico is scheduled for review in July 2026. Mexico will be seeking relief from U.S. tariffs, and by effectively aligning with President Trump in keeping Chinese exports out of North America, President Sheinbaum is strengthening her negotiating position. (RELATED: Trump Proved ‘Experts’ Wrong About Tariffs)
Allowing Chinese vehicles into a market is not “free trade.” China has excess capacity of government-subsidized vehicles, which it is dumping into new markets, causing great harm to existing auto manufacturing operations. Many of these vehicles are manufactured by state-owned entities, whose primary purpose is to provide jobs in China, not to make a profit. Mexico has learned how damaging this trade structure is. Canada would be wise to take note.
READ MORE from Buck Throckmorton:
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