When the Mexican Senate voted last week to approve a 50 percent tariff rate on a broad swathe of countries — China, India, Brazil, South Korea, Vietnam and Taiwan among them — politicians from Mexican President Claudia Sheinbaum’s ruling Morena party pretended they did it for their own reasons. Nobody in Asia believes that this is a bold declaration of economic independence. It is seen instead as opening an unexpected front in US President Donald Trump’s trade war on the world.
The vote waived the senators’ usual right to discuss amendments in committees, and it passed 76-5, with the opposition abstaining. Officials grandly delivered the usual lines that accompany measures cutting off trade: It would protect local industry, that revenue would increase by almost US$3 billion, that there would be more money to spend on supporting the unemployed.
But the real reason is that Sheinbaum is spooked by the deadline, six months away, for reviewing the US-Mexico-Canada Agreement (USMCA). The speed with which she pushed the legislation through and its timing are no coincidence: Trump said earlier this month that he might let the North American Free Trade Agreement’s successor expire, or “maybe work out another deal” that ensured the US was not “taken advantage of.” Nobody wants that can of worms reopened.
Illustration: Yusha
About 80 percent of Mexico’s exports cross its northern border, and more than 80 percent of those are tariff-free under USMCA. The country depends upon US markets for 30 percent or so of its output. Mexican politicians are clearly scared enough that even acts of economic self-harm, such as 50 percent tariffs, seem worth trying.
For the countries affected by the new rates out of Mexico City, this is a sobering reminder that they have more than just the US president to deal with. Trade is a complicated, disaggregated affair, which is why we have multilateral arrangements such as the WTO. For much of 2025, we could pretend that was not the case, with everyone scrambling to conclude their own bilateral deal with the US. But Sheinbaum shows that the trade conflicts Trump has launched are a cascading war, not some controlled confrontation.
Some are going to be hit particularly hard. One of the few industries in India that has carved out a successful export niche for itself is auto components. New tariffs could render them uncompetitive inputs for the giant factories along the US border serving the insatiable US appetite for cars.
But a significant proportion of Indian exports to Mexico are not about the US at all. It is consistently among the top three or four destinations in the world for small, fuel-efficient cars, for example. These are not meant for Americans, but they have been hit with tariffs anyway. Sheinbaum is paying Trump protection money, but she has taken it from the pockets of Indian producers.
And from her own citizens, of course. Opposition lawmakers pointed out that official modelers had given up on trying to estimate the effects of such a drastic change to Mexican trade policy. Citgroup’s economists think that this could keep domestic inflation above 4 percent next year. All the other downstream, predictable effects of tariffs should apply: loss of competitive advantage, factories that face supply crunches and retaliation in fields where you do not expect it.
And what happens if Trump decides that he does not care about such expensive professions of loyalty, and shuts down USMCA anyway? Mexico City is going to have to rebuild trade relations with the rest of the world from scratch, but capitals from Brasilia to Beijing might not be particularly warmly disposed toward them at that point.
Many countries in Asia had hoped that US-first trade policy — even if disruptive — might end up forging a united front against Chinese dominance of manufacturing. Sheinbaum’s surrender shows us a different path. In this alternative world, some countries might quietly enact the US president’s policies for him. Others, perhaps with China in the lead, might try to find a multilateral path to isolate collaborators.
Countries across Asia and beyond know that it is not just their relationship with the US that is threatened, but with multiple other nations as Trump tries to push everyone into his dream, high-tariff world. He has already asked the EU to impose 100 percent tariffs on China and India. It is unlikely to agree. Some countries might raise high and unpredictable trade barriers against each other and the world, while the rest could seek security and prosperity by integrating faster and further. Sheinbaum might have picked the wrong side.
In his first term, Trump promised to have Mexico pay for his wall. In his second term, he has succeeded. So what if the wall is one of tariffs, and not bricks?
Mihir Sharma is a Bloomberg Opinion columnist. A senior fellow at the Observer Research Foundation in New Delhi, he is author of Restart: The Last Chance for the Indian Economy. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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