In the fall of 2025, the Mexican government submitted a bill to Congress that would significantly increase tariffs on imports from countries without a free trade agreement (FTA). The bill would affect about 1,400 items, including automobiles, steel, electronics, textiles, and toys, with tariffs likely to be raised from an earlier 15-20 percent to a maximum of 50 percent. The affected countries include not only China, but also Indonesia, the Philippines, and Thailand, seen as part of Mexico’s “U.S.-centric trade diplomacy,” which prioritizes commercial relations with Washington.
In the background of Mexico’s action lies the threat of additional tariffs from the Trump administration. The United States has taken issue with a “loophole” for imports from countries outside the United States-Mexico-Canada Agreement (USMCA) to enter the American market via USMCA member countries. The United States is trying to get other member countries to commit to strengthening import controls vis-à-vis China and other non-members ahead of the upcoming USMCA renegotiations (revisions planned for July 2026).
To avoid pressure from the United States, the Mexican government has launched a defensive tariff policy against non-FTA countries and made it clear that it is willing to make concessions to the U.S. However, Mexico accounts for less than 1 percent of ASEAN countries’ total exports and so is not a critical important export market. As such, this measure will not represent a serious blow to the ASEAN economies.
Disparities
The problem is that the “FTA disparities” among ASEAN members are becoming more pronounced. Since Vietnam, Malaysia, and Singapore are part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), they will not be subject to this tariff hike as they already have signed FTAs with Mexico. By contrast, Thailand is forced to pay a higher tariff rates as a non-FTA signatory, thus decreasing the relative competitiveness of its export prices. However, Indonesia and the Philippines have applied to join the CPTPP in September 2024 and September 2025, respectively, so it is possible that they may benefit from preferential tariff schemes in the future as the agreements are ratified and enter into force. The result is an entrenchment of institutional winners and losers within ASEAN, while steps are simultaneously taken toward restructuring the organization through an expansion of its membership. These differences are not accidental. Rather, they symbolize a new reality in which countries that have proactively pursued FTAs reap the benefits of gradual trade liberalization, while those that have not risk being left behind. Mexico’s latest policy initiative only highlights this vulnerability.
Selective Protectionism
At the same time, questions arise about whether Mexico’s tariff hike for non-FTA signatories contravenes WTO regulations. Article 1 of the GATT defines most favored nation treatment (MFN) and generally stipulates that the same tariff rate should be applied to all member countries. As such, imposing high tariffs solely on countries without an FTA would, at first glance, seem to be in contravention of this. However, Article 24 of the GATT allows exceptions for tariffs being eliminated between member states and different tariff rates being imposed on non-member countries when the purpose is to form a customs union or a free trade area. That is, discrimination by way of FTAs is institutionally sanctioned.
Mexico’s average bound tariff rate is 36.2 percent, reaching well over 200 percent for some items. Even if tariffs were raised to 50 percent, this would not contravene WTO regulations as long as they take place within this concession framework. Formally, Mexico can claim that it has simply applied the regular MFN tariff rate to non-FTA signatories, within the scope of the bound tariff rate. In other words, it represents a form of legalized protectionism that deftly exploits the institutional framework. Even if it causes free trade to regress on a conceptual level, there is no legal way to stop it.
Therein lies the essential risk of this development. In short, if Mexico can successfully implement this measure, several other countries may follow suit. In fact, it is quite likely that Mexico followed Turkey’s precedent. Turkey has imposed additional tariffs and import restrictions on countries that are not customs union members or FTA signatories, with the scope of items affected expanding year by year. The United States, Brazil, India, and other countries likewise tend to raise tariffs and set up barriers that especially target non-FTA signatories and items not covered by agreements.
FTA Blocs and ASEAN’s Response
If these trends gather momentum, it will render obsolete the WTO’s MFN principle, effectively reorganizing global trade into a patchwork of FTA-based blocs. Countries with FTAs will receive preferential treatment, while others run into walls of high tariffs. A partitioning of world trade is quietly progressing.
In response to these environmental changes, ASEAN’s first step ought to be to expedite an expansion and further utilization of its FTA networks. ASEAN is already promoting extensive liberalization through the Regional Comprehensive Economic Partnership (RCEP) and the ASEAN+1 agreements, but few inroads have been made into Latin America and Africa. Thailand, Indonesia, the Philippines, and other countries that are not members of the CPTPP should consider future membership and secure indirect market access via existing agreements such as the Japan-Mexico Economic Partnership Agreement. Second, ASEAN should restructure its supply chain strategies. Considering policy changes, such as those of Mexico, and strengthening measures targeting roundabout trade, it is necessary to form multi-layered supply networks centered on local production and local procurement.
Lastly, ASEAN as a whole must strive to maintain the free and fair trade order. The Mexican case illustrates the reality that the free trade system is effectively being reorganized amid a net of exclusive FTAs, even though the system is institutionally maintained. ASEAN is in a position to take the lead in inclusive rule-making through RCEP and the future Digital Economy Framework Agreement (DEFA). ASEAN should proactively shape a trade order in which FTAs serve as bridges, not barriers, before selective protectionism becomes a global norm.
SUKEGAWA Seiya is a professor at the Faculty of Political Science and Economics, Kokushikan University, and a visiting professor at Thai-Nichi Institute of Technology.
