Being sealed off three times in a year, the situation in Mexico Yiwu City is severe | Focus Analysis

Written by Hu Yiting

Edited by Yuan Silai

When the US presidential election came to an end, a lightning-like sealing operation was launched in the neighboring capital of Mexico.

Recently, according to foreign media reports, on November 28 local time, the Mexican government dispatched a team composed of more than 200 law enforcement officers to carry out a surprise sealing of the China Yiwu International Trade City in the Mexican capital. In this operation, Mexican law enforcement officers confiscated more than 262,000 imported products with a value of approximately 75 million pesos (about 26.66 million yuan), which took as long as 7 hours.

Shortly after the sealing operation, the authorities held a press conference. Mexican Economy Minister Marcelo Ebrard presented a confirmation from the FGR, stating that the ownership of the Yiwu Trade City in Mexico and the entire building would be confiscated, and all contraband would be destroyed. The official believes that these goods do not meet Mexico's import regulations and safety standards.

When people were confused about the connection between this trade city and Yiwu, on December 4, Zhejiang China Commodity City Group Co., Ltd. issued an official statement indicating that the company has no connection with the "China Yiwu International Trade City" that was sealed in Mexico. Up to now, the Yiwu government has only invested in and established a single overseas sub-market in Dubai in collaboration with local enterprises.

In fact, this is not the first time that the Yiwu Trade City in Mexico has faced sealing. It is understood that in July this year, the mall was sealed due to the lack of necessary documents to prove the legitimacy of land use, and the seals were not lifted until the end of August. Soon after, it faced this large-scale raid.

This means that the Yiwu City in Mexico is quite controversial in terms of business qualifications and commodity compliance. However, Mexico has a close economic and trade relationship with the United States, and its policies towards foreign goods are also deeply influenced by the latter. Although Trump has not officially taken office, merchants heading to North America are already on high alert.

Hindering Local Enterprises

In the official press conference, Mexican Economy Minister Marcelo Ebrard stated that there had been three surprise raids on this Yiwu Trade City before. In March and July of this year alone, the government had sealed the place on the grounds of investigating illegal smuggling of goods and the lack of necessary operations for merchants. This means that under the large-scale trade, it has already attracted the attention of the authorities.

The China Yiwu International Trade City is located at Izazaga 89 (No. 89, Izazaga Road) in the center of the Mexican capital, and is also known as the "Mexican Market". Most of the goods sold here come from Asian countries such as China, Malaysia, Indonesia, Bangladesh, and Vietnam, including categories such as electronic products, toys, clothing, and jewelry.

Last year, a reporter from Zhejiang Daily visited the trade city. According to local Zhejiang merchants, more than 90% of the merchants in the 16-story trade city are Chinese, and it has been open for only four years. The mall is quite popular, with the areas around the toilets and the parking lot transformed into shops for rent; even an e-cigarette store with an area of about ten square meters can generate a daily revenue of 20,000 pesos, equivalent to about 7,000 yuan.

During the search, violations and infringements have become reasons repeatedly mentioned by the Mexican authorities. In the press conference, Marcelo Ebrard mentioned that the confiscated goods had no labels and contained a large number of pirated Disney products, which is against the norm.

This time, the Mexican authorities may have made a greater determination to carry out rectification. In addition to banning goods, it will also trace import documents, investigate relevant shipping and customs agents, and carry out long-term operations at seaports and airports across the country.

Continuous Rectification, Image Source: IC photo

When a single event rises to the dimension of international trade, Mexican officials have also stated that they will encourage companies to localize production and try to replace Chinese imports.

This also sends a signal: Even if domestic problems such as social security, regional poverty, and corruption have not yet been solved, local substitution in Mexico will accelerate in more industries.

This tendency has become increasingly apparent in recent years, and the government's tariff stick has fallen repeatedly. In August last year, the Mexican president signed a decree to raise import tariffs on 392 tariff items such as steel, aluminum, bamboo products, rubber, and chemical products. Nearly 92% of these products are subject to an additional 25% import tariff, and this decree will last for two years.

In December 2023, the relevant Mexican departments announced that the tariffs on some steel products exported from China to Mexico would be increased to about 80%.

After the continuous introduction of tariff policies, the Mexican authorities also directly stated their position. Its Economy Minister Raquel Buenrostro publicly stated at the Americas Council event: "We see many products entering at very low prices and replacing domestic producers in Mexico." Although she did not specifically mention China, she mentioned that the "undervalued" imported products mainly come from Asia.

From heavy industrial manufacturing steel to clothing products used by residents daily, Mexico, as a market and resale place, has been discovered by Chinese merchants for many years, which may pose a greater threat to local enterprises.

Eliminating the Old and Embracing the New

Under the large-scale sealing, the model of Yiwu small commodities may not meet the current and future development needs of Mexico.

As the "backyard" of the United States, Mexico has developed a new model - "Nearshoring Outsourcing".

"Nearshoring Outsourcing" specifically refers to enterprises outsourcing business such as the supply chain to neighboring countries or adjacent regions with similar geography, time zones, and languages. Due to the frequent occurrence of geopolitical conflicts, the United States, on the grounds of "resolving the fragility of the supply chain", encourages enterprises to replace "Offshoring Outsourcing" with "Nearshoring Outsourcing".

Through this, neighboring Mexico has received a large amount of foreign capital injection from the United States. According to data from the Mexican Ministry of Economy, in 2023, Mexico attracted a foreign direct investment of 36.058 billion US dollars, an increase of 2.2% year-on-year, setting a new historical high. Among them, investment from the United States is leading by a large margin, accounting for 38%.

At the same time, Chinese home appliance, automotive, and other enterprises have also taken a fancy to Mexico and have rushed to set up factories there. According to data from the Mexican Foreign Trade Bureau (ProMéxico), about 16% of Mexico's imported goods in 2024 come from China, and most of these goods are produced in Mexico itself.

Produced in Mexico, Image Source: IC photo

For Mexico, receiving foreign capital injection and boosting local employment and economic vitality is more promising than the Yiwu small commodity model that has risks of gray customs clearance and infringement.

Even as a country located far away and with a relatively shallow level of development, Mexico has entered a stage of rapid development of cross-border e-commerce, and the demand for the traditional model of offline stocking has decreased.

Public data from the Mexican Retailers Association shows that the total value of Mexico's e-commerce market reached 28 billion US dollars in 2024, with a growth of 22%.

Mexico is also aiming at this, increasing investment in infrastructure. The Mexican Ministry of Transport and Communications once said that it plans to invest more than 22 billion US dollars this year in port, railway, and road construction to meet the needs of logistics and trade.

Even though the local situation in Mexico is still unstable in terms of infrastructure and public security, government-led, with the help of foreign capital, and nourishing the local has become the main direction for Mexico in the future. The densely packed stalls and tens of thousands of small commodities are no longer accepted by the authorities, and the sealing is only a matter of sooner or later.

Trump's upcoming assumption of office may have accelerated the occurrence of this event. At the end of November this year, Trump posted on his self-created social media platform that he would impose a 25% tariff on all imported goods from Mexico and Canada. This will affect the stability of Mexico's local industries, which enjoy zero-tax benefits under the United States-Mexico-Canada Agreement (USMCA).

At present, Mexico has already stepped into the crossroads of economic reform. Sealing the Yiwu Trade City is the result of its weighing and choosing, and a tough statement. This also indicates that going overseas in compliance will become more important, and no piece of land will always tolerate the gray area.