Chinese car manufacturers have long regarded Mexico as a gateway to North and South America. Over the past few years, China and Mexico have forged closer economic ties. However, the trade conflict between the United States under Trump and Beijing casts its shadow and leaves Chinese manufacturers’ expansion plans in the Central American country hanging in the balance, analyzes Christian Domke Seidel. This also has a massive impact on Mexico – as Mexican officials fear that a BYD factory could send the wrong signal to Trump.
“It will not be possible to overcome the climate crisis without China. Its actions are decisive for the preservation of biological diversity and the environment,” says the German government’s China strategy, which was adopted in 2023. However, it also says that the People’s Republic is a strong competitor in green technologies such as photovoltaics and strives for market and technology leadership in these sectors.
The same tension can be found in the circular economy, as ESG.Table colleague Nicolas Heronymus writes. The extraction and processing of resources are harmful to the climate and biodiversity. China’s per capita resource consumption is significantly higher than that of Germany. Yet China continues to successfully develop its circular economy. What can Germany learn?
China and Mexico have forged closer economic ties in recent years. This has a lot to do with the automotive industry. Manufacturers and suppliers from the People’s Republic have long been established in Mexico. One in three of the 1.4 million newly registered cars last year came from a Chinese brand.
However, Chinese interest goes far beyond the local market. Mexico is supposed to open the door to North and South America for China’s brands – and the plan is working. The country became the third-largest car exporter in the world in 2023. Car exports climbed to a volume of 189 billion US dollars and accounted for one-third of the country’s total exports. Only the EU and China itself exported more cars.
Now, tariffs and trade disputes jeopardize this development. On Monday, US President-elect Donald Trump announced a 25 percent tariff on imports from Mexico in a bid to force the Mexican government to show more determination in the fight against drug and human trafficking. This surcharge would affect not only the Mexican economy but also Chinese car manufacturers in Mexico.
For example, BYD from Shenzhen. As the Wall Street Journal reports, the company is finalizing its plans for its own production plant in Mexico. The company, which rivals Tesla as the world’s largest EV manufacturer, would be a major gain for the country. However, a 25 percent tariff would make a factory for export to the USA less lucrative. BYD and other companies have to fear that they will not be welcomed by the Mexican government due to concerns about Trump’s policies.
Mexican officials fear that the construction of a BYD factory might give the impression that Mexico serves as a back door for Chinese companies. “At this time, investments from China have to be analyzed with extreme caution,” Wall Street Journal quotes Eduardo Solís, a consultant and former head of Mexico’s automotive industry association. His advice: Mexico must present itself as a reliable partner of North America.
BYD has celebrated successes in recent months. In the second quarter of 2024, the EV specialist overtook industry giants Honda and Nissan to become the seventh-largest car manufacturer in the world with 980,000 vehicles sold. Of these, 105,000 units were exported – three times as many as in the same period last year.
BYD actually chose Mexico for its new plant with a capacity of 150,000 cars per year, where its 20,000-dollar small electric car, the Dolphin Mini, is particularly popular. BYD’s investment would create around 10,000 jobs. The traditional British brand MG, which has long been in Chinese hands, also has plans for a production site and an R&D center in the country. However, the uncertainties caused by the trade disputes between the USA and China have stalled these plans.
After Russia, Mexico is the second-largest export market for Chinese manufacturers. In 2023, they exported cars worth 4.6 billion dollars to the country. However, according to Chinese analyst Founder Securities, only 134,000 of the 415,000 vehicles stayed in Mexico. The majority went to the USA or Canada. These countries are worried about the large number of cheap competitors and have taken action: Since the end of September, they have been imposing a 100 percent tariff on Chinese EVs. Regardless of where they come from. One solution for Chinese manufacturers is to manufacture directly in the country using a local supply chain.
The various OEMs have built 3.5 million cars in Mexico in 2023. According to the American trade authority, 80 percent of these vehicles are exported to the United States. Only one Chinese manufacturer currently operates a plant in Mexico. JAC manufactures gasoline cars there, but they are not exported to the USA or Canada. BYD and MG would significantly increase local Chinese capacities with their new plants.
North Americans are correspondingly critical of the developments. In early 2024, the Mexican government clarified that Chinese car manufacturers would not receive direct subsidies if they decided to build a plant in Mexico. This is likely due to threats by the Americans and Canadians to significantly restrict the US-Mexico-Canada Agreement (USMCA)
However, it is doubtful that canceled subsidies or even the medium-term prohibition of trade routes to the north will prevent Chinese companies from investing in Mexico. Production costs in Mexico are low, supply chains are stable, and skilled workers are available. Mexico also maintains free trade agreements with 50 countries. The opportunities in the Latin American market are correspondingly vast.
Mexico is also already home to 30 Chinese suppliers. The trade journal Automobil-Produktion calculates that 18 of them are already supplying the US – in 2023, this would have been goods worth around one billion dollars. And the trend is rising. If this supply chain breaks, it could become a problem for American manufacturers.
The strict import regulations are already causing problems for American brands. A planned tightening of restrictions on Chinese software and hardware will affect General Motors and Ford, for example. They manufacture the Buick Envision and Lincoln Nautilus in China for the American market. Both companies will have to relocate production or stop exporting.
“It will not be possible to overcome the climate crisis without China. Its actions are decisive for the preservation of biological diversity and the environment,” says the German government’s China strategy, which was adopted in 2023. However, it also says that the People’s Republic is a strong competitor in green technologies such as photovoltaics and strives for market and technology leadership in these sectors.
The same tension can be found in the circular economy. The extraction and processing of resources are harmful to the climate and biodiversity. China’s per capita resource consumption is significantly higher than that of Germany, which, according to the German Environmental Agency, is too high and must fall. At the same time, China is successfully developing its circular economy, says Raimund Bleischwitz, Scientific Director of the Leibniz Center for Tropical Marine Research. Examples include eco-industrial clusters where companies from different stages of the value chain collaborate, as well as circularity product standards.
There are opportunities to establish a circular economy worldwide if Germany and China cooperate with other willing countries – for example, by sharing experiences and data as well as standardized requirements, says Bleischwitz, who is also Professor of Global Sustainable Resources at the University of Bremen.
China has been pursuing the goal of a circular economy since 2000. The eleventh five-year plan (2006-2010) included a separate chapter on the topic. This was followed in 2009 by a law to promote the circular economy with a focus on “prevention, reuse and recycling.” The current, fourteenth five-year plan (2021-2025) sets production and sales targets for secondary raw materials. For example, the revenue of the recycling market is set to grow to over 770 billion US dollars. “The circular economy in China is closely linked to industrial policy goals, which are then broken down to the company level through circular product standards,” says Bleischwitz.
According to Bleischwitz, China focused on the circular economy relatively early because it recognized how heavily industrialization pollutes the environment. From the outset, the aim was to reduce emissions – initially to combat air pollution in cities. In addition, China is also highly dependent on raw material imports, just like Germany or the European Union. Bleischwitz sees this as another strategic reason to reduce the consumption of primary raw materials. China has managed to double its resource productivity since 1990. The high growth rates, partly in the service sector, have also contributed. But ultimately, “China has achieved a relative decoupling of economic growth from resource consumption,” says Bleischwitz – specifically: Resource use has been growing slower than gross domestic product.
Germany’s goals are similar. Both countries seek to protect the climate and the environment as well as reduce dependence on imports. To this end, the German government plans to adopt a national circular economy strategy before the end of the year. The Federal Ministry for the Environment (BMUV) presented a draft of the strategy to a delegation from the National Development and Reform Commission of the People’s Republic of China (NDRC) in late May. The NDRC is the most important authority in China for planning economic development.
The meeting took place in April as part of a strategic dialogue agreed between Federal Environment Minister Steffi Lemke and NDRC Chairman Zheng Shanjie. It is part of the climate and transformation dialogue that the two governments agreed on in 2023. Regarding the circular economy, they plan to discuss more circularity and resource efficiency in the value chains of important materials like plastics and metals. Policy instruments, such as ecological criteria for product design or extended manufacturer responsibility, will also be a topic of discussion. The next meeting is set to be held in the first half of 2025.
Bleischwitz welcomes the fact that structured communication is now taking place between the two countries. Due to the re-election of Donald Trump as US President and the overall difficult geopolitical situation, such formats could be particularly useful. “The key to international cooperation are clubs in which a coalition of states and non-state actors prepare solutions.” In this context, it could consist of the EU and its industry, Japan, and, “where possible, China.” This concerns, for example, uniform standards – which the German industry would like to see for the digital product passport or ecodesign requirements.
Being a pioneer in the circular economy – a goal that Chancellor Olaf Scholz proclaimed for Germany in January – means for Bleischwitz: collaborating with other countries to provide impetus for international, circular value chains. According to the researcher, a resource agency could be founded to organize the circular economy globally – based on the model of the International Energy Agency. Such an agency would compile resource consumption and demand data, draw up forecasts, and pool expertise. “I would be pleased if the dialog between Germany and China could provide impetus for this – even if a lot of work is still needed before that happens,” says Bleischwitz.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.
Changchun. Steel city. Motor city. This is where Puyi, the last emperor of China, once ruled the satellite state of Manchukuo as a puppet of the Japanese occupiers. The average temperature in January is minus 17 degrees. However, it can occasionally drop to almost minus 40 degrees. It’s a city perfect for heavy metal. Some of the most famous Chinese metal bands are from Changchun, such as Black Kirin. Now a vibrant underground rave scene parties in hidden bars and old air raid shelters – without being disturbed by police officers and officials who are unaware of it. Their DJs celebrate a car city on the other side of the world, where techno was once born. From Detroit to Changchun.
Chinese car manufacturers have long regarded Mexico as a gateway to North and South America. Over the past few years, China and Mexico have forged closer economic ties. However, the trade conflict between the United States under Trump and Beijing casts its shadow and leaves Chinese manufacturers’ expansion plans in the Central American country hanging in the balance, analyzes Christian Domke Seidel. This also has a massive impact on Mexico – as Mexican officials fear that a BYD factory could send the wrong signal to Trump.
“It will not be possible to overcome the climate crisis without China. Its actions are decisive for the preservation of biological diversity and the environment,” says the German government’s China strategy, which was adopted in 2023. However, it also says that the People’s Republic is a strong competitor in green technologies such as photovoltaics and strives for market and technology leadership in these sectors.
The same tension can be found in the circular economy, as ESG.Table colleague Nicolas Heronymus writes. The extraction and processing of resources are harmful to the climate and biodiversity. China’s per capita resource consumption is significantly higher than that of Germany. Yet China continues to successfully develop its circular economy. What can Germany learn?
China and Mexico have forged closer economic ties in recent years. This has a lot to do with the automotive industry. Manufacturers and suppliers from the People’s Republic have long been established in Mexico. One in three of the 1.4 million newly registered cars last year came from a Chinese brand.
However, Chinese interest goes far beyond the local market. Mexico is supposed to open the door to North and South America for China’s brands – and the plan is working. The country became the third-largest car exporter in the world in 2023. Car exports climbed to a volume of 189 billion US dollars and accounted for one-third of the country’s total exports. Only the EU and China itself exported more cars.
Now, tariffs and trade disputes jeopardize this development. On Monday, US President-elect Donald Trump announced a 25 percent tariff on imports from Mexico in a bid to force the Mexican government to show more determination in the fight against drug and human trafficking. This surcharge would affect not only the Mexican economy but also Chinese car manufacturers in Mexico.
For example, BYD from Shenzhen. As the Wall Street Journal reports, the company is finalizing its plans for its own production plant in Mexico. The company, which rivals Tesla as the world’s largest EV manufacturer, would be a major gain for the country. However, a 25 percent tariff would make a factory for export to the USA less lucrative. BYD and other companies have to fear that they will not be welcomed by the Mexican government due to concerns about Trump’s policies.
Mexican officials fear that the construction of a BYD factory might give the impression that Mexico serves as a back door for Chinese companies. “At this time, investments from China have to be analyzed with extreme caution,” Wall Street Journal quotes Eduardo Solís, a consultant and former head of Mexico’s automotive industry association. His advice: Mexico must present itself as a reliable partner of North America.
BYD has celebrated successes in recent months. In the second quarter of 2024, the EV specialist overtook industry giants Honda and Nissan to become the seventh-largest car manufacturer in the world with 980,000 vehicles sold. Of these, 105,000 units were exported – three times as many as in the same period last year.
BYD actually chose Mexico for its new plant with a capacity of 150,000 cars per year, where its 20,000-dollar small electric car, the Dolphin Mini, is particularly popular. BYD’s investment would create around 10,000 jobs. The traditional British brand MG, which has long been in Chinese hands, also has plans for a production site and an R&D center in the country. However, the uncertainties caused by the trade disputes between the USA and China have stalled these plans.
After Russia, Mexico is the second-largest export market for Chinese manufacturers. In 2023, they exported cars worth 4.6 billion dollars to the country. However, according to Chinese analyst Founder Securities, only 134,000 of the 415,000 vehicles stayed in Mexico. The majority went to the USA or Canada. These countries are worried about the large number of cheap competitors and have taken action: Since the end of September, they have been imposing a 100 percent tariff on Chinese EVs. Regardless of where they come from. One solution for Chinese manufacturers is to manufacture directly in the country using a local supply chain.
The various OEMs have built 3.5 million cars in Mexico in 2023. According to the American trade authority, 80 percent of these vehicles are exported to the United States. Only one Chinese manufacturer currently operates a plant in Mexico. JAC manufactures gasoline cars there, but they are not exported to the USA or Canada. BYD and MG would significantly increase local Chinese capacities with their new plants.
North Americans are correspondingly critical of the developments. In early 2024, the Mexican government clarified that Chinese car manufacturers would not receive direct subsidies if they decided to build a plant in Mexico. This is likely due to threats by the Americans and Canadians to significantly restrict the US-Mexico-Canada Agreement (USMCA)
However, it is doubtful that canceled subsidies or even the medium-term prohibition of trade routes to the north will prevent Chinese companies from investing in Mexico. Production costs in Mexico are low, supply chains are stable, and skilled workers are available. Mexico also maintains free trade agreements with 50 countries. The opportunities in the Latin American market are correspondingly vast.
Mexico is also already home to 30 Chinese suppliers. The trade journal Automobil-Produktion calculates that 18 of them are already supplying the US – in 2023, this would have been goods worth around one billion dollars. And the trend is rising. If this supply chain breaks, it could become a problem for American manufacturers.
The strict import regulations are already causing problems for American brands. A planned tightening of restrictions on Chinese software and hardware will affect General Motors and Ford, for example. They manufacture the Buick Envision and Lincoln Nautilus in China for the American market. Both companies will have to relocate production or stop exporting.
“It will not be possible to overcome the climate crisis without China. Its actions are decisive for the preservation of biological diversity and the environment,” says the German government’s China strategy, which was adopted in 2023. However, it also says that the People’s Republic is a strong competitor in green technologies such as photovoltaics and strives for market and technology leadership in these sectors.
The same tension can be found in the circular economy. The extraction and processing of resources are harmful to the climate and biodiversity. China’s per capita resource consumption is significantly higher than that of Germany, which, according to the German Environmental Agency, is too high and must fall. At the same time, China is successfully developing its circular economy, says Raimund Bleischwitz, Scientific Director of the Leibniz Center for Tropical Marine Research. Examples include eco-industrial clusters where companies from different stages of the value chain collaborate, as well as circularity product standards.
There are opportunities to establish a circular economy worldwide if Germany and China cooperate with other willing countries – for example, by sharing experiences and data as well as standardized requirements, says Bleischwitz, who is also Professor of Global Sustainable Resources at the University of Bremen.
China has been pursuing the goal of a circular economy since 2000. The eleventh five-year plan (2006-2010) included a separate chapter on the topic. This was followed in 2009 by a law to promote the circular economy with a focus on “prevention, reuse and recycling.” The current, fourteenth five-year plan (2021-2025) sets production and sales targets for secondary raw materials. For example, the revenue of the recycling market is set to grow to over 770 billion US dollars. “The circular economy in China is closely linked to industrial policy goals, which are then broken down to the company level through circular product standards,” says Bleischwitz.
According to Bleischwitz, China focused on the circular economy relatively early because it recognized how heavily industrialization pollutes the environment. From the outset, the aim was to reduce emissions – initially to combat air pollution in cities. In addition, China is also highly dependent on raw material imports, just like Germany or the European Union. Bleischwitz sees this as another strategic reason to reduce the consumption of primary raw materials. China has managed to double its resource productivity since 1990. The high growth rates, partly in the service sector, have also contributed. But ultimately, “China has achieved a relative decoupling of economic growth from resource consumption,” says Bleischwitz – specifically: Resource use has been growing slower than gross domestic product.
Germany’s goals are similar. Both countries seek to protect the climate and the environment as well as reduce dependence on imports. To this end, the German government plans to adopt a national circular economy strategy before the end of the year. The Federal Ministry for the Environment (BMUV) presented a draft of the strategy to a delegation from the National Development and Reform Commission of the People’s Republic of China (NDRC) in late May. The NDRC is the most important authority in China for planning economic development.
The meeting took place in April as part of a strategic dialogue agreed between Federal Environment Minister Steffi Lemke and NDRC Chairman Zheng Shanjie. It is part of the climate and transformation dialogue that the two governments agreed on in 2023. Regarding the circular economy, they plan to discuss more circularity and resource efficiency in the value chains of important materials like plastics and metals. Policy instruments, such as ecological criteria for product design or extended manufacturer responsibility, will also be a topic of discussion. The next meeting is set to be held in the first half of 2025.
Bleischwitz welcomes the fact that structured communication is now taking place between the two countries. Due to the re-election of Donald Trump as US President and the overall difficult geopolitical situation, such formats could be particularly useful. “The key to international cooperation are clubs in which a coalition of states and non-state actors prepare solutions.” In this context, it could consist of the EU and its industry, Japan, and, “where possible, China.” This concerns, for example, uniform standards – which the German industry would like to see for the digital product passport or ecodesign requirements.
Being a pioneer in the circular economy – a goal that Chancellor Olaf Scholz proclaimed for Germany in January – means for Bleischwitz: collaborating with other countries to provide impetus for international, circular value chains. According to the researcher, a resource agency could be founded to organize the circular economy globally – based on the model of the International Energy Agency. Such an agency would compile resource consumption and demand data, draw up forecasts, and pool expertise. “I would be pleased if the dialog between Germany and China could provide impetus for this – even if a lot of work is still needed before that happens,” says Bleischwitz.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.
Changchun. Steel city. Motor city. This is where Puyi, the last emperor of China, once ruled the satellite state of Manchukuo as a puppet of the Japanese occupiers. The average temperature in January is minus 17 degrees. However, it can occasionally drop to almost minus 40 degrees. It’s a city perfect for heavy metal. Some of the most famous Chinese metal bands are from Changchun, such as Black Kirin. Now a vibrant underground rave scene parties in hidden bars and old air raid shelters – without being disturbed by police officers and officials who are unaware of it. Their DJs celebrate a car city on the other side of the world, where techno was once born. From Detroit to Changchun.
