Next in Trade: Will China and Mexico do a Free Trade Deal?

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As nations start to partner up on new free trade deals, the U.S. could get pushed right out of the position it had hoped to be in. Now the two biggest targets on Trump’s naughty list for trade may be banding together.

Last week, Chinese ambassador to Mexico Qiu Xiaoqi said China is willing to negotiate a free trade deal with Mexico.

“Mexico is China’s second largest trading partner in Latin America and China is Mexico’s second-largest trading partner in the world. This is a highly important relationship and we have a great interest in deepening and broadening these ties,” Qiu told Xinhua news. “I think any agreement to make trade easier is very worthy.”

The world, it seems, is going right around President Trump, forging new ties or strengthening old ones, as he works to cordon off the United States, to what end no one is yet clear.

This week, the EU and Japan reached an agreement on a free trade deal that will create a trade bloc to rival NAFTA and see the two sides trading nearly all of their goods without duties and tariffs.

[Read more about the EU-Japan trade deal and how it will change apparel and footwear: EU and Japan Read Free Trade Deal—What it Means for Apparel and Footwear]

Both China and Mexico have faced threats of steep tariffs from the U.S. under the Trump Administration, but their own trade deal could be a somewhat beneficial workaround—or, as some have said, it could be little more than political posturing to put forth what appears to be a united front against the United States.

Mexico—which is facing a renegotiation of NAFTA and the possibility, however small, that Trump pulls out of the trade deal altogether—has been keeping its options open, so to speak. The country has also been in talks for a new trade deal with the European Union. In May, the two sides said they were closing in on a trade deal and that negotiations would wrap at the end of this year.

In May, Mexico’s economy minister Ildefonso Guajardo said at a news conference following talks with EU Trade Commissioner Cecilia Malmström, “The clear message is that we will not paralyze ourselves given the challenges we face in the Washington renegotiations of the North American Free Trade Agreement…Mexico will continue to move forward and today more than ever the strategy of diversification (of exports) has become an obligation so as to re-position the Mexican economy.”

A China-Mexico trade deal, however, may do little to change relations for the two as the distance between them won’t lend itself to accommodating demand for fast fashion, and neither will costs serve that cause. It could also mean a further reduction of tariffs on Chinese goods, which could cost Mexico even more of its manufacturing jobs.

No discussions have been held so far on a trade deal between the two countries, but China is willing to start.

“If we negotiate a free-trade agreement, this will greatly favor trade exchanges between our two countries,” the Chinese ambassador to Mexico, Qiu, said. “There is no difficulty from China’s side.”

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