EM LATAM CREDIT: Mexico: Asia Tariffs – Positive

(MEX; Baa2neg/BBB/BBB-)

• President Sheinbaum’s Plan Mexico announced earlier this year calls for an increase in manufacturing capacity so the recently announced tariff of up to 50% on 1,463 Asia imported products into Mexico will provide a more competitive landscape both for exports and for domestic sales. The government hopes to increase manufacturing for domestic consumption and not just exports. Currently, about 75% of auto production is for export for example. The tariffs are also expected to raise MXN52bn (USD2.9bn) in tariff revenue.
• MEX March 2035s were quoted T+149bp, 30bp tighter since June 30th and nearly 60bp YTD, which is impressive considering sovereign and quasi sovereign Issuance totaled about USD46bn equivalent this year which was only surpassed in two other years this century in 2020 and 2016.
• The new tariffs approved by the Mexico congress were seen as especially aimed at Chinese imports. This may also be supportive for discussions with the U.S. when it comes time to negotiate a new trade agreement in July 2026 to potentially replace the USMCA.
• The U.S. has raised concerns that China assembles products in Mexico for export to the U.S. in order to avoid U.S. tariffs on Chinese imports. China naturally was very critical of the new legislation, especially the impact it would have on textiles and industrial products.