With United States President Donald Trump announcing a 25 percent tariff on all imports from Mexico and an additional 10 percent tariff on all Chinese imports, the Mexican route to invade the American market has been effectively shut for Chinese companies.
The previous Joe Biden administration had imposed a 100 percent tariff on the entry of Chinese electrical vehicles and taken effective steps to prevent the entry of synthetic opioid drug fentanyl to the U.S. from China. Since then, Chinese companies have been investing heavily in Mexico in facilities for the manufacture of EVs and fentanyl and using the Mexican route to access the American market; taking advantage of the United States-Mexico-Canada Agreement which is a free trade agreement between the U.S., Mexico and Canada.
The blanket imposition of an additional 10 percent tariff on all imports from China is also a warning to Beijing to stop pushing the dangerous drug fentanyl to the U.S. Fentanyl is killing tens of thousands of people in the U.S. every year.
Chinese EV majors like BYD, Chery and MG Motors, the last one a former British company now controlled by Chinese state-sector auto manufacturer SAIC Auto, are the leading investors in Mexican auto production; setting up assembly plants and production facilities. Chinese investments in Mexico are also concentrated in the production of auto parts for electrical vehicles.
These Chinese companies enjoy an unfair advantage in competition with auto majors in other countries as the communist government in China heavily subsidizes these companies producing EVS so they can offer their products cheap and capture the markets in other countries. But government subsidies to manufacturers breed inefficiency in the system and thus undermine the optimal use of global resources. This is against the principles of the General Agreement on Tariffs and Trade signed in 1994 under the aegis of the World Trade Organization.
Living up to his promise, President Donald Trump on February 2 signed an order to impose stiff tariffs on imports from Mexico and China. He did not make any secret of the reason behind this punitive step against the three nations. In a social media post, he made it clear that the tariff was necessary “to protect the Americans,” and to put pressure on these nations to do more to curb the manufacture and export of illicit fentanyl. Since then, Trump has announced a month’s moratorium on the additional tariff on products from Mexico to see if it takes effective steps to stop the flow of fentanyl to the U.S. through the Mexican border, but no such concession has been offered to products from China.
An investigation by Reuters has exposed the dastardly plan of Beijing to undermine America with the lethal drug fentanyl in its quest for global leadership. It is a sad commentary for the Chinese Communist Party which takes pride that it had once taken the leading role in helping the Chinese people in kicking the habit of smoking opium.
It is rather easy to purchase precursors for the manufacture of fentanyl online from Chinese sellers, who send them by air to the U.S. disguised as gadgets and they pass the customs duty-free along with other Chinese imports. They are again sent by traffickers to drug labs in Mexico. Beijing has used, may have even engineered, the illegal fentanyl trade to harm Americans. A bipartisan report in the U.S. House of Representatives has called China the “ultimate geographical source” of fentanyl.
Counternarcotics officials in the U.S. say that the biggest obstacle to solving the fentanyl crisis facing America is China. In light of this, the 10 percent additional tariff on Chinese products announced by Donald Trump could just be an “opening volley.” Howard Lutnick, who is the frontrunner to head the Commerce Department under the Donald Trump administration, said in an interview last October that “China is attacking America” with fentanyl and suggested that Donald Trump should levy tariffs as high as 200 percent on China.
Security officials in the U.S. are of the opinion that pressure must be mounted on the communist leaders in Beijing to stop pushing fentanyl to the U.S. The previous Joe Biden administration had been negotiating with the authorities for a crackdown on fentanyl, but to no avail. China continues to be the dominant source of chemical precursors used by Mexican cartels to produce fentanyl, while Chinese money launderers have become key players in the international drug trade.
The Donald Trump administration is now planning to ramp up pressure on the Chinese authorities to take effective steps to stop the flow of fentanyl to the U.S. The 10 percent tariff on imports from China is one such punitive measure, but a more effective step could be to sanction Chinese banks doing business with money launderers and corrupt chemical sellers. For, the opportunity for doing business can be severely curtailed for foreign banks hit with U.S. sanctions. The Reuters investigation says that the Donald Trump administration has other plans up its sleeves to force China to prevent the flow of fentanyl; like criminal indictment of major Chinese and Mexican financial institutions laundering money for the cartels, mass sanction of Chinese companies and people engaged in the fentanyl trade, announcing rewards for most-wanted traffickers, cyber warfare against Mexican cartels and treating those engaged in fentanyl trade at par with terrorists.