Ontario Premier calls Mexico a ‘backdoor’ for cheap Chinese imports

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Ontario Premier Doug Ford has weighed in as trade talks loom with the new Trump administration in Washington, accusing Mexico of being a back door for cheap Chinese imports and even calling on Canada to seek its own exclusive two-way deal with the United States.

With U.S. president-elect Donald Trump promising to reopen the United States-Mexico-Canada Agreement (USCMA) when it is up for review in 2026, Mr. Ford called on Mexico to match Canadian and U.S. tariffs on Chinese electric vehicles, steel and aluminum – or be stripped of its tariff-free access to rest of the North American market.

Mexico has “allowed itself to become a backdoor for Chinese cars, auto parts and other products into Canadian and American markets,” Mr. Ford claimed in a statement on Tuesday, adding that the country “shouldn’t have a seat at the table or enjoy access to the largest economy in the world” if it doesn’t follow its northern neighbours on efforts to exclude Chinese goods.

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“Instead, we must prioritize the closest economic partnership on Earth by directly negotiating a bilateral U.S.-Canada free trade agreement that puts U.S. and Canadian workers first,” the Premier’s statement reads.

Mr. Ford’s message echoes a key complaint that Mr. Trump aired on the campaign trail, and seems aimed at aligning Ontario with the new U.S. administration in the hope of avoiding tariffs the incoming president has threatened to put on all imports to the U.S.

American policy makers in both parties have become increasingly concerned about investment by Chinese automakers in Mexico, given that country’s tariff-free access to the United States.

This is an extension of U.S. fears about competition from Chinese companies, such as BYD and Geely, which are producing high-quality electric vehicles at a fraction of the price of U.S., European and other Asian carmakers. Western policy makers complain that China has gained an edge in EV manufacturing because of extensive state subsidies.

In his first term as president, Mr. Trump slapped a 25-per-cent tariff on high-tech Chinese goods. President Joe Biden maintained these tariffs and increased them to 100 per cent for Chinese EVs earlier this year. Ottawa followed suit in October with its own 100-per-cent tariff on Chinese EVs.

During the election campaign, Mr. Trump threatened to put 200-per-cent tariffs on Mexican vehicles until they stop using Chinese-made parts and block Chinese companies from owning auto plants in Mexico.

Chinese car brands are already being sold in Mexico, where they are winning a growing share of the auto market, and several Chinese automakers have announced plans to build factories there. So far, however, no major Chinese automaker has started production in Mexico and auto imports from China aren’t moving across the border into the U.S. or Canada, said Stephanie Brinley, associate director and principal North America automotive analyst with S&P Global Mobility.

“I don’t think it’s a significant issue at the moment, I think that a lot of this is pre-emptive more than it is reactive,” she said.

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“There are parts and components that are coming from China, but there have been for decades. … Where that has potential to be worse is a, ‘What if’ scenario, if you look at BYD or MG or SAIC building a plant in Mexico and having some of their component suppliers also invest in Mexico rather than using the existing North American suppliers.”

The USMCA did tighten rules on auto manufacturing in an attempt to move more production to North America and particularly the United States, and includes a provision that all vehicles must be made at factories paying above a certain wage for tariff-free status. But some auto companies found the treaty too onerous, and opted instead to pay existing tariffs under the World Trade Organization rules, which are 2 or 3 per cent, and source car parts from China or other countries.

Dan Ujczo, a senior counsel with the U.S. law firm Thompson Hine LLP, said that the stricter rules of origin in the USMCA, compared with the earlier North American free-trade agreement, have already pushed auto companies to reduce the quantity of inputs sourced from China and elsewhere.

“I’m not suggesting in any way the door is fully closed … but automakers and their suppliers are aware of the issue and have taken significant steps to ensure that they’re complying with the rules of origin,” he said.

The bigger challenge from a legal perspective is the foreign direct investment by Chinese companies, Mr. Ujczo said. If they set up shop in Mexico and follow the rules outlined in the USMCA, there is no reason, as it stands, they can’t access U.S and Canadian markets tariff free.

“What you have to do is come up with a way to target those China-source companies that are otherwise complying with the rules, and that gets very tricky in trade law,” he said, adding that he expects the U.S. to push Mexico to tighten its own rules around foreign investment, and to push to have Chinese carmakers designated “foreign entities of concern” within the USCMA framework.

Mexico’s chief negotiator in the talks that resulted in the USMCA, Kenneth Smith Ramos, now a consultant in the private sector, said all three countries need to work together as they face China’s competitive threat.

“I think the comments are unfortunate,” he said of Mr. Ford’s remarks. “I think it’s precisely something that could hurt our chances, both for Mexico and Canada to have a successful review toward 2026 of the USMCA, because of the divide-and-conquer strategy that president Trump has always used,” he said in phone interview with The Globe and Mail.

He also dismissed the notion that Mexico was engaging in “unfair trade practices,” saying Ottawa could have challenged Mexico under the provisions of the existing trade deal but has not. He acknowledged that the U.S. is nervous about planned Chinese electric-vehicle plants in Mexico. But he said so far, there is not a single such factory and that no Chinese EVs are being manufactured in Mexico or exported to the U.S. or Canada.

Flavio Volpe, chief executive officer of the Auto Parts Manufacturers’ Association, said the incoming Trump administration is highly concerned about transshipments of Chinese parts through Mexico and that the issue is serious. He warns that an imposing wave of cheap Chinese parts, batteries and EVs could eventually flow through not just Mexico but many other countries, “priced for market domination, not for profit.”

Prime Minister Justin Trudeau, when asked about Mr. Ford’s comments while in Fredericton on Tuesday, said Canada would work with the U.S. and “hopefully Mexico” to address China’s “unfair trade practices.”

Mexico’s embassy in Ottawa did not provide a comment before deadline. But the New York Times reported this week that the country’s Economy Minster says Mexico intends to hit back with matching tariffs of its own if Mr. Trump follows through with his threat of tariffs.

With files from Laura Stone