Currency Strength Undercuts Mexico’s Import Duties on China
The peso’s 15% annual appreciation in 1Q26 offset Mexico’s largest tariff increase in a decade, preventing the duties on 1,463 products from China, South Korea, India, Indonesia, Russia, Thailand, and Turkey from reaching consumer prices, according to Banamex. Imports from China rose 5.23% to US$42.85 billion in January-April 2026, undermining the Sheinbaum administration’s import-substitution strategy for textiles, footwear and automotive sectors. The outcome affects retailers, manufacturers and importers as Mexico faces US pressure to curb Chinese trade ahead of the USMCA review.
That is the conclusion emerging from the first months of the country’s toughest import duties in a generation: a rallying national currency, the “superpeso,” as traders have dubbed it, absorbed the extra cost that the new levies were supposed to attach to merchandise arriving from China. Shoppers browsing for toys, garments, appliances, vehicles, refrigerators, shoes or cosmetics never saw the surcharge show up at the register.
Economists at Grupo Financiero Banamex traced the mechanics in a report from the bank’s Economic Studies Department. “During the first quarter, the peso appreciated around 15% annually, which lowered the cost of imported goods and partially offset the increase at the border associated with the tariff,” the report found.
The offset was not marginal. In some product categories, the bank calculated, currency gains equaled, and occasionally outweighed, the duty increase itself, keeping retail prices flat on goods shipped from China, South Korea, India, Indonesia, Russia, Thailand and Turkey. Among all the forces cushioning the landed cost of merchandise from those seven origins, the exchange rate proved one of the most powerful.
Banamex framed the finding carefully. “The superpeso does not eliminate the effect of the tariff, but it does help explain why a clear and generalized increase in consumer prices was not observed during the first months of the measure,” the institution stated. A duty makes goods more expensive at the port of entry, the bank observed; whether that expense travels all the way to the final buyer is a separate question, and in this case, the answer so far has been no.
The Policy the Peso Overrode
What the currency neutralized was an ambitious piece of industrial policy. Legislators gave their approval on Dec. 29, 2025, to the broadest tariff expansion Mexico had undertaken in 10 years, the centerpiece of President Claudia Sheinbaum’s bid to replace foreign goods with national output and defend domestic factories and jobs from inexpensive shipments out of China, South Korea, India, Indonesia, Russia, Thailand and Turkey.
The reform touched 1,463 product classifications, a universe representing 8.6% of everything Mexico buys abroad, all of it sourced from economies with no trade pact with the country. Treasury officials expect the taxed goods to yield MX$30 billion a year, part of a broader projection that foreign trade tax collections will jump 62% in 2026, reaching MX$254.757 billion.
The December vote was less a single decision than the top floor of a structure assembled over three years: duties on steel arrived in 2023, heavy industry followed in April 2024, and textiles were added that December. Everyday consumer categories carry the heaviest burden, 35% on clothing and textiles, 35% on footwear, and 50% on automobiles, the maximum the World Trade Organization allows.
Congress did not pass the executive’s draft untouched. Deputies reworked 60% of the original text and cut the proposed rates by 28% across 974 items, wool textiles among them, after consultations that involved Beijing, no small consideration, given that only the United States sells Mexico more than China does.
Objections surfaced immediately from commerce groups linked to Chinese trade. The China Chamber of Commerce and Technology Mexico warned that the measures “will have direct consequences for the consumers and will reduce the competitiveness of value chains that use these inputs in Mexico.”
The Goods Keep Coming
Trade flows tell the same story as the price data. Far from shrinking, Mexico’s imports from China grew 5.23% in the January-April window of 2026, climbing to US$42.85 billion from US$40.72 billion a year before, with textiles, toys, housewares and food-contact products leading the demand. Across all of 2025, Chinese goods worth US$133.27 billion entered the country.
Mexican importers, in short, are absorbing the new rules rather than abandoning their suppliers. Chinese factories retain the scale, price points, catalog depth and shipping networks that retail and e-commerce operations depend on. The broader picture reinforces the point: Mexico’s total import bill reached US$176.6 billion in the 1Q26, up 18.4% year over year, and nearly four-fifths of it, 79.7%, consisted of intermediate goods destined for domestic production lines.
For the government, the currency’s intervention is a double-edged outcome. Households escaped a tariff-fueled inflation shock, easing pressure on monetary policy. Yet the same relief drains force from the strategy’s core purpose: with import prices essentially unchanged, buyers have little reason to migrate toward Mexican-made substitutes, and the import-substitution agenda stalls before it starts.
There is a diplomatic layer as well. The duties took effect just ahead of the USMCA review, as Washington leaned on Mexico to harden its defenses against Chinese goods and flagged suspected transshipment through Mexican ports. Whether the tariff wall ever functions as designed may hinge less on the rates written into law than on two variables outside the customs office: the peso’s trajectory, and domestic industry’s capacity to supply what the duties were meant to displace.