By Diego Oré
MEXICO CITY, Dec 8 (Reuters) - Mexican lawmakers are slated to begin debate this week on a bill to raise tariffs on goods from China and other Asian countries, three ruling party lawmakers told Reuters, amid fierce opposition from China and Mexican business groups.
The proposal would raise tariffs by up to 50% on imports of automobiles, textiles, clothing, plastics, steel and other products from China and other Asian countries that do not currently have a trade pact with Mexico, including
India, South Korea, Thailand, and Indonesia.
Mexico's Economy Ministry first outlined the proposed tariffs in September but the initiative struggled to gain widespread support in Congress, despite the ruling Morena party and its allies holding a significant majority.
President Claudia Sheinbaum's administration says the measure aims to strengthen productive capacity, protect national employment and ensure that Mexico competes fairly in the global market addressing trade imbalances with China.
"During these last few years our country faced trade distortions, unfair practices, and a growing dependence on imported inputs that affected national productive sectors," said Ricardo Monreal, the lower house leader for the ruling Morena party, on social media on Friday.
The proposal would also bring an additional 70 billion pesos ($3.76 billion dollars) to state coffers, Deputy Minister for Revenues Carlos Lerma said in September as the government was preparing the measure.
Neither Sheinbaum's office nor the Economy Ministry responded to requests for comment.
A SENSE OF URGENCY TO GET IT DONE THIS YEAR
Sheinbaum met privately at the National Palace with allies and legislators from her Morena party in late November and urged them to approve the bill before the end of the year, four sources familiar with the meeting told Reuters.
"The instructions were to pass it before the congressional session ends on December 15," one of the sources said.
This person, like the other sources, requested anonymity to discuss sensitive political matters and a private meeting that has not been previously reported.
"There is a sense of urgency within the administration to get this done before the end of the year," the source added.
Two of the sources said that the proposal to be taken up by lawmakers this week might be softer than the original bill, which stalled in the lower house of Congress this fall in the face of intense opposition from China and business groups.
Industry associations have warned that the proposed tariffs would significantly increase production costs, given their heavy reliance on Chinese imports of machinery, components, and raw materials.
In particular, the government's proposal may scale back the tariff increases on auto parts and steel products, the two sources said. Reuters was not able to ascertain the exact changes.
Mexico's automotive assembly sector, one of the largest in the world, has warned that the proposed tariffs could cut off access to essential electronic components, such as digital dashboard touchscreens, which are not produced locally.
'THE IMPACT COULD BE BRUTAL'
Looming over Mexico's sweeping tariff proposal is next year's USMCA review. Earlier this year, Mexico already stepped up tariffs on Chinese goods in what analysts said was an effort to appease Washington. But U.S. officials continue to raise concerns.
On Thursday, U.S. Trade Representative Jamieson Greer said Canada and Mexico should not be used as export hubs for China, Vietnam, Indonesia and other countries and said that this was already happening in some cases in Mexico.
Experts warn the proposed tariffs could disrupt critical supply chains at a time when Mexico's economy, the second largest in Latin America, has virtually stalled. Most at risk are electronics and automotive industries that rely heavily on Chinese parts, according to Mexico's National Autoparts Industry group.
"The impact could be brutal," said Amapola Grijalva, chair of the Mexico-China Chamber of Commerce and Technology, which represents Chinese companies operating in Mexico and Mexican firms in China.
"These tariff levels would block domestic manufacturers' access to certain technologies and products that allow them to remain competitive both at home and abroad."
The proposal would also affect India, one of Mexico's growing trade partners. India supplies pharmaceuticals, textiles, chemicals and auto parts, while Mexico exports oil, copper and agricultural goods to India.
In recent months, business leaders have fiercely lobbied Mexico's Finance and Economy ministries to scrap the measure or, at the very least, remove some tariff categories and phase in the tax burden gradually.
Initially, government officials refused to budge, the four sources said. But since November, they have shown greater flexibility, the four sources said, suggesting they could be open to smaller tariff increases than originally proposed or removing sensitive products from the list of more than 1,400 categories.
(Reporting by Diego Oré; Additional reporting by Ana Isabel Martínez and Emily Green; Editing by Laura Gottesdiener and Aurora Ellis)
