Trudeau floats ‘other options’ if Mexico won’t address China trade concerns

Prime Minister Justin Trudeau said Thursday he would prefer Mexico remain a North American free trade partner but “we may have to look at other options” if the country doesn’t address concerns about Chinese manufacturers working to wedge into the market.

Trudeau said he raised the “real and genuine concerns about Chinese investment into Mexico” directly with Mexican President Claudia Sheinbaum in a meeting on the sidelines of the G20 leaders’ summit in Brazil on Monday. Those concerns have led some Canadian premiers to call for Canada to strike its own bilateral deal with the U.S. under incoming president-elect Donald Trump, cutting Mexico out of the Canada-United States-Mexico Agreement (CUSMA).

The prime minister said his first priority will be to stand up for Canadian workers and the Canadian economy, and that Ottawa was “leaving all doors open” to secure those interests.

“Ideally, we do that as a united North American market,” he told reporters at an unrelated press conference in Toronto. “But, pending decisions and choices that Mexico has made, we may have to look at other options.” He would not say what those options might be.

“But let me just say it again: my ideal situation is we continue to work well together to protect jobs in North America from overcapacity or economic coercion that other countries have been responsible for.”

Sheinbaum told reporters in Mexico City on Wednesday that Trudeau “doesn’t agree” with the calls to cut Mexico out of CUSMA, and that during their meeting at the G20 they agreed on maintaining a three-way trade deal.

But she also said she told Chinese President Xi Jinping at the summit “that we have a trade agreement with North America, but that there was room for a relationship with China, which was very important.”

Ontario Premier Doug Ford said last week that Mexico is “importing cheap products” from China, then “slapping a made-in-Mexico sticker on and shipping it up” into Canada and the U.S., bypassing both CUSMA rules and Canadian and American tariffs on Chinese vehicles. Trump has made similar comments about China using Mexico to access the U.S. auto market, threatening the American industry.

Ford called for a bilateral deal with the U.S. and a separate one with Mexico “if Mexico wants,” which Alberta Premier Danielle Smith said she agreed with “1,000 per cent” in a CBC interview Friday.

Ford claimed Wednesday after a call with his fellow premiers that they all backed his demand for separate bilateral trade deals with the U.S. and Mexico.

Trump has vowed to reopen CUSMA to address the issue when the trade pact is up for review in 2026. He railed during the campaign about Chinese automakers building manufacturing plants in Mexico, which is not currently happening, although China’s top EV maker BYD has plans for a Mexican facility.

Deputy Prime Minister Chrystia Freeland said Tuesday that she shares the “legitimate” concerns about Chinese investment in Mexico, and the fact Mexico has yet to align with Canadian and U.S. tariffs on Chinese electric vehicles and materials like steel and aluminum.

She said the concerns have been raised to her directly by both members of the outgoing administration of President Joe Biden and the incoming Trump administration.

“We are not a backdoor to Chinese unfair traded goods,” Freeland said Tuesday. “However, the same cannot be said of Mexico.”

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A report by the United States Trade Representative earlier this year warned that U.S. industry stakeholders “expressed concerns that increasing Chinese foreign direct investment in the automotive sector in Mexico poses a significant threat to the competitiveness of the North American auto industry” and could allow China to skirt tariffs.

According to the U.S. industry group Coalition for a Prosperous America, which promotes the U.S. taking a combative trade stance, more than 20 Chinese auto manufacturers have invested billions in Mexico.

The Biden administration in July imposed new tariffs on steel and aluminum shipped from Mexico but made elsewhere, a move meant to address the evasion of tariffs by China.

Deputy Mexican Foreign Trade Minister Luis Rosendo Gutierrez last month said Mexico would continue to prioritize the U.S. and Canada due to their strategic alliance through CUSMA, but that did not imply Mexico would “break with China” or “deny them investments in Mexico.”

CUSMA’s rules of origin clause requires higher levels of North American parts in vehicles sold in the three countries compared with NAFTA, which Trump has said China is also trying to exploit by bringing Chinese components through Mexico.

Trump, who has vowed a blanket 10 per cent tariff on all foreign imports, has said Mexican imports could see a 25 per cent levy if the country doesn’t stem the flow of migrants arriving at the U.S. border.

During the presidential campaign, Trump said he would impose tariffs of at least 200 per cent or more on all vehicles imported from Mexico — which would hurt American automakers in the short term — and suggested levies on Chinese companies who operate in Mexico and bypass CUSMA rules as high as 1,000 per cent.

Mexico has vowed to retaliate with its own tariffs on American imports if Trump follows through with his threat, which the country’s economic minister warned would bring economic harm to North America.

—With files from The Canadian Press and Reuters