This Week’s Global Trade Policy Focus: U.S.-Mexico Dynamics

On December 8th, Donald Trump publicly accused Mexico of violating the 1944 U.S.-Mexico Water Treaty, threatening to impose an additional 5% tariff unless Mexico releases 200,000 acre-feet of water by December 31st to assist U.S. farmers.

Shortly thereafter, Mexico announced increased tariffs on imported goods from countries without free trade agreements, including China, Vietnam, Thailand, India, and South Korea. The adjustment covers 1,463 tariff lines across multiple industries such as automobiles and auto parts, textiles and apparel, raising the tariff rate from the original 0%-20% to 10%-50% (maximum). The new rates are expected to take effect on January 1, 2026.

Meanwhile, Mexico has tightened cross-border e-commerce tax regulations: Sellers who fail to upload their RFC tax IDs will face automatic withholding of 20% income tax plus 16% VAT by platforms. Overall, the China-U.S. tariff landscape remains unchanged, but Mexico is comprehensively raising trade and compliance thresholds. Its impact on Asian supply chains is already emerging.