The Impact of Tariffs on Chinese EV/PHEVS and Vehicle Adoption Rates in Mexico

This thesis examines the impact of Mexico's 2025 decision to raise tariffs on Chinese automobiles from 20% to the World Trade Organization maximum of 50% on electric vehicle (EV) and plug-in hybrid electric vehicle (PHEV) adoption rates. Motivated by U.S. pressure amid escalating great-power competition, the tariff increase threatens Mexico's ambitious climate targets-including 50% zero-emission vehicle sales and a one-million-tonne reduction in CO2 emissions by 2030-precisely when affordable Chinese EVs had driven 70% of Mexico's electrified sales and nearly 20% of total vehicle sales.
Employing a partial equilibrium model, the study simulates three own-price elasticity scenarios (−2.0 moderate, −1.5 conservative, −2.5 extreme) and two cross-price elasticity assumptions (1.2 moderate substitution, 0.7 conservative) using 2025 baseline data. Results show Chinese imports decline sharply (37.5% -- 62.5%), total national EV/PHEV adoption falls from 21.8% to 43.9%, and tariff revenue rises in moderate and conservative cases but contracts under extreme price sensitivity due to Laffer Curve effects.
The findings demonstrate that protectionist tariffs on the most affordable segment of the EV market inadvertently slow decarbonization, raise consumer prices, and erode market competition. Situated within Enrique Dussel Peters' framework of "new triangular relationships," the analysis highlights Mexico's dilemma between U.S. security demands and the environmental benefits of Chinese green technology. Policy recommendations include accelerating the Olinia micro-mobility project and attracting Chinese foreign direct investment in domestic assembly to reconcile geopolitical pressures with national climate goals. This case underscores the risks of subordinating sustainable development to short-term geopolitical concessions in emerging economies.