Washington and Beijing’s Mexican Standoff

As Trump’s bumbling threats continue to alienate the US in Latin America, China is increasingly determined to hold its ground in the US’ so-called “backyard”.

Just over a week ago, the embassies of the world’s two apex economic superpowers, the US and China, clashed in Mexico. The spark was a speech given by US Ambassador (and former CIA agent and Green Beret) Ronald Johnson at a gathering of a gala dinner of the American Society of Mexico (AMSOC) sponsored by the billionaire tycoon Ricardo Salinas Pliego, who is seeking to position himself as a populist Milei-type figure in Mexican politics.

In what can only be described as a severe case of projection, Johnson accused “countries like China of trying to impose their financial control and greater economic and supply chain dependence on some places in our own Western Hemisphere”. The words represented the latest escalation in the battle for economic power and influence in Latin America between the US and China.

It is a battle that the US is handily losing, as we have reported for the past four years and as even the FT conceded last year. China is already South America’s largest trade partner. As Reuters reported in 2022, if you take Mexico’s huge trade partnership with the US out of the equation, which Trump seems determined to torpedo, China has already overtaken the US as Latin America’s largest trade partner.

Even a fanatically US-aligned government like Milei’s is strengthening its ties with China, much to Washington’s chagrin, while the Petro government of traditional US vassal state Colombia has joined the BRICS bank and is talking about cancelling its NATO global partnership due to the military alliance’s support of Israel’s genocide in Gaza.

Colombia’s🇨🇴 President Gustavo Petro says Colombia will LEAVE partnership with NATO over the Gaza genocide:

‘How can we stand with armies that drop bombs on children? Those armies are not armies of freedom, those are armies of darkness. We have to leave, there’s no other way.’ pic.twitter.com/yZyTX1G0un

— Going Underground (@GUnderground_TV) July 17, 2025

As is becoming increasingly clear, China is determined to hold its ground in the US’ so-called “backyard”. As the American Quarterly notes, the recent China-CELAC (Community of Latin American and Caribbean States) summit underscored the striking contrast between the two countries’ approaches:

Xi Jinping appears to be aligning more closely than ever with the region as the Trump administration pushes an agenda focused on migration, tariffs, and even expansionist ambitions…

By announcing a $9 billion yuan-denominated credit line and fresh infrastructure investment for the region, Xi not only reasserted China’s role as a development financier but also positioned the yuan as an alternative to the dollar-dominated monetary logic—a strategy aligned with the country’s long-term efforts to internationalize its currency. “There are no winners in tariff wars or trade wars. Bullying or hegemonism only leads to self-isolation,” Xi said in his inaugural speech.

In September last year, Beijing urged the US to give up the antiquated Monroe Doctrine as Washington intensified its meddling in Mexico, Venezuela and Honduras. The Chinese government also continues to block a corporate deal that would transfer ownership of more than 40 sea ports, including two crucial terminals on the Panama canal, to a Western BlackRock-led consortium, again much to the chagrin of Washington.

Now, Mexico finds itself on the frontlines of this escalating tussle between the world’s two apex  economic superpowers. In response to Ambassador Johnson’s remarks, the Chinese embassy in Mexico posted a tweet accusing the US of spreading “lies full of ideological prejudices and cold war thinking”:

The “theory of China’s threat”, hysterically propagated by the United States, is nothing more than an excuse to maintain its own hegemony. From imposing arbitrary restrictions and erecting commercial barriers, to mistreating foreign immigrants and trafficking in illegal weapons, as well as inventing false positions to sanction financial institutions from other countries, a country like the United States is shamelessly killing the region of the Western Hemisphere. The United States seeks everywhere and in every way to set traps and attach labels to China, forgetting that it is [the US itself] that constitutes the true regional destabilizer, economic-commercial threat and saboteur of development.

Justice lives in the hearts of the people, the United States’ defamation of China is destined to fail. It would be advisable for the Ambassador of the United States in Mexico to dedicate more energy to promoting friendship with the country in which he believes, instead of inventing things out of nothing and confusing white with black, to avoid a total loss of credibility.

US Losing Credibility

So far, the tweet has had almost half a million views. One point it raises that is undeniable is that the US is rapidly losing credibility in Mexico. With his unilateral aggressions against the country, Trump has already caused a dramatic a shift in public opinion… towards China.

One recent Pew Research survey found that 45% of Mexicans consider China to be the largest economy in the world, up from 33% two years ago. Crucially, 45% of respondents said they want the relationship with China to be prioritised over that of the United States while 44% would prefer relations with the US to be prioritised. This places Mexico among the most polarised countries on the issue of US/China relations.

Interestingly, Mexico was one of only five of the 24 (Western or Western-aligned) countries surveyed by Pew Research that wanted its government to prioritise relations with China, albeit by a wafer-thin margin.

Perhaps most importantly, more than two-thirds of Mexican respondents (68%) considered the United States to be the greatest threat to the country, compared to 5% for China. That is well above the levels of distrust for the US registered among Indonesians (40 percent vs. 19 percent), South Africans (35 percent vs. 13 percent), Turks (30 percent vs. 2 percent), Brazilians (29 percent vs. 15 percent) and Argentines (24 percent vs. 13 percent).

This last result is perhaps unsurprising given that members of the Trump administration have been debating to what extent, not whether, the US should “invade” Mexico, and have been issuing threats on a more or less constant basis. That this is intensifying anti-US sentiment in a country that has already suffered at least 10 military interventions from its northern neighbour in its 204 years of independence from Spain is hardly surprising.

There is a clear shift in public opinion taking place in Mexico, and it is one that is likely to intensify as long as Trump continues to treat the country as his piñata. Here is a quick  recap of some of the provocative threats and actions the Trump administration has launched against Mexico, the US’ largest trade partner, over the past eight months:

1. It has appointed a former CIA agent and Green Beret as US ambassador.
2. It has renamed the Gulf of Mexico to “Gulf of America.”
3. It has significantly militarised the US-Mexican border by sending thousands of troops, spy planes and even two warships to surveil the land and coasts.
4. It has imposed a series of tariffs on Mexican goods, many of which violate not only the WTO rules, but also the USMCA trade deal negotiated by Trump and ratified by the US Congress.
5. It has designated Mexican drug cartels as terrorists.
6. It has withdrawn visas for a number of Mexican politicians.
7. It has imposed a 3.5% tax on all remittance payments sent by US-based migrants, many of them Mexican, back home.
8. It has sanctioned two Mexican banks and one brokerage house, resulting in their emergency intervention by the Mexican authorities.
9. This week, the US Department of Transportation has threatened to restrict flights from Mexico to the US, ostensibly in retaliation for Mexico’s alleged failure to comply with air commitments between the two countries.
10. Also this week, a Department of Homeland Security official warned that Mexican drug cartels could soon deploy weaponised drones at the border.

As El País notes, one of the main reasons why Trump is constantly attacking the US’ North American trade partners, Mexico and Canada, is to gain leverage in the coming renegotiation of the USMCA.

Sheinbaum’s position since Trump’s trade war began has been to preserve the USMCA; however, the neighbouring country to the North and main buyer of Mexican exports, advocates a “renegotiation” of the trade agreement.

“President Trump is definitely going to renegotiate the USMCA, but that will be within a year. He wants to protect American jobs, he doesn’t want cars to be made in Canada or Mexico when they could be manufactured in Michigan and Ohio,” U.S. Commerce Secretary Howard Lutnick said this weekend in local media.

The problem for Mexico is that a renegotiated USMCA deal is likely to be even more prejudicial than the current one, especially if Trump carries through on his threat to close down automotive plants in Mexico and Canada. Then there’s the simple fact that the US’ word means nada. Trump may end up signing a new deal only to violate it or renege on it days later. The constant threats of intervention will also no doubt continue, and may even be acted upon.

China: A Realistic Alternative?

In other words, the world’s largest trade partnership will almost certainly continue to sour as Mexico’s deeply asymmetrical relationship with its biggest trade partner becomes more and more abusive. An early example of blowback from Trump’s tariffs and remittance tax was a 10% fall in Coca Cola’s sales volumes in Mexico, one of its most important markets in the second quarter. As readers may recall, Coca Cola was the target of a consumer boycott in the early days of Trump 2.0.

But does China represent an economic alternative? The current answer is: definitely not.

Although trade between the two countries has ballooned in recent years, it is almost all going in one direction: from China to Mexico, and in many cases onwards to the US.

In 2024, Mexico’s exports to China represented just 1.5% of its total exports while its imports from China represented just over 20% of the total. Contrast that with Mexico-US trade: Mexico’s exports to the US last year represented 83% of all its exports while its imports represented just over 40% of the total. Which begs the question: given the vast gulf between their respective trade volumes, why is the US even worried about Mexico-China relations?

The answer is simple: it is the trend that matters. As Enrique Dussel, the director of the UNAM’s Center for China-Mexico Studies (Cechimex), explains to El País, Mexico’s trade with China increased from 1% of the total in 2000 to 11% China in 2022, while its trade with the US fell from 81% of the total to 62% in the same period, mainly due to the rise in Mexican imports of Chinese goods:

This U.S. is Mexico’s first trade partner with a downward trend, China is the second with an upward trend. What is happening in Mexico is also happening in Argentina, Brazil, Peru and Chile: the productive apparatus is replacing imports that were historically American with Chinese ones. The products affected include electronics, auto parts, telecommunications and automotive. It is not a one-to-one correspondence, but there is a strong association of substitution through imports.

Within this reality, the trilateral relationship between China, Mexico and the US is unique, as we noted in a post last September, just two months before Trump’s re-election:

The US and Mexico share the world’s most frequently crossed border and after 30 years of NAFTA and USMCA, their economies are tightly coupled. China and Mexico are not just trade partners but direct competitors vying for the custom of the world’s largest consumer market, which is trying to wean itself off Chinese products. Mexico has so far emerged as the largest beneficiary of the US’ nearshoring strategy, but the more it exports to the US, the more it needs to import from China. And that is the last thing the US wants.

Over the past year, the US has escalated its war of words against both China and Mexico over the illicit fentanyl trade that is killing tens of thousands of US citizens a year. But as AMLO [and now Sheinbaum have] repeatedly argued, the US government has spectacularly failed to address the root causes of drug addiction within its borders. Instead, some US lawmakers and pundits have proposed using military force on Mexico’s sovereign territory, with or without Mexico’s permission, to combat drug cartels.

That was the situation before Trump’s arrival. The situation today is far worse. On the one hand, Trump 2.0 is intent on undoing many of the nearshoring processes Trump 1.0 unleashed by targeting China with tariffs. On the other hand, Mexico is arguably as dependent as ever on the US even though its trade with the US as a proportion of the total has fallen somewhat.

Mexico sources around half its food from the US and more than 70% of its natural gas. Mexico’s sheer level of dependence on the US — no comparably sized economy in the world sends more than 80% of its exports to one destination — and the constant threats of military or financial intervention emanating Washington, Mexico suffers from a structural vulnerability that limits the sovereign capacity of the Mexican State to make long-term strategic decisions.

The Mexican economist Mario Campa notes that one of the two main stumbling blocks preventing closer ties between Mexico and China is the huge — and growing — trade deficit between the two countries, which he claims could be somewhat rectified through trade negotiations. The other, of course, is Washington. Regardless of who occupies the White House, the US government and its myriad agencies will not look kindly upon Mexico further deepening its trade relations with China, or the BRICS as a whole.

But what alternative will Mexico have? To stay trapped in an increasingly dysfunctional relationship with a country whose government keeps threatening to invade? While many of the relative benefits of USMCA are whittled away next year by Trump’s protectionist demands?

The Sheinbaum government’s response so far has been to launch Plan Mexico, an ambitious national industrial policy whose main objective is to reposition Mexico as a global hub for advanced manufacturing, technological innovation, attracting foreign direct investment and relocating production chains, with an emphasis on key sectors such as automotive, electronics, aerospace, pharmaceuticals and information technologies.

The question is: whose market(s) will it serve if the USMCA unravels?

For geographic reasons and given the unparalleled size of its consumer market, the US makes the most sense. Even without a North American trade deal and with Trump’s tariffs, the US will struggle to find a cheaper, more reliable manufacturing hub literally on its doorstep. Meanwhile, China is at the core of the Asia-Pacific region, which has been the main engine of global economic growth so far in the twenty-first century. If it can, Mexico should expand its exposure to that region.

One way of doing that will be by completing the Interoceanic Corridor of the Isthmus of Tehuantepec (CIIT), which could help establish Mexico as a global logistics hub. This huge infrastructure project is scheduled to be fully operational in the first half of next year. Once completed, it will link up four key ports — Coatzacoalcos, Veracruz, Salina Cruz, Oaxaca, Dos Bocas, Tabasco, and Puerto Chiapas — via 1,200 kms of railway lines, integrating 10 industrial and development poles.

CIIT is arguably Mexico’s most ambitious infrastructure project of this still rather young century and its timing could not be better, coming as the Panama Canal’s logistics remain at the mercy of the weather and climate. There is also the ongoing tussle between the US and China over who owns the company operating the two ports at each end of the canal, which recently escalated into a war of words between the US and Chinese embassies in Panama.

As I noted in my article last week on Trump’s tomato tariffs, if there’s one thing that can push Mexico closer to the BRICS, and by extension China, it is Trump himself. Without his constant bullying, Mexico may not have agreed to participate in the recent BRICS summit, for the first time ever.

Mexico and founding BRICS member Brazil, Latin America’s two largest economies, are now fast-tracking negotiations for an expanded trade agreement as both countries brace for hefty US tariffs, set to take effect on August 1. This would probably not have happened, at least not this quickly, if it weren’t for Trump’s accidental matchmaking.