31 May Tariffs and barriers to competition in Mexico

In certain cases, antitrust problems are not due to corporate conduct, but to legal or structural barriers that distort free competition. Tariffs, for example, are a barrier that limits competition in both domestic and international markets. It is essential to distinguish between anticompetitive corporate conduct and a market structure that impedes the full development of competition.

High market concentration in emerging industries can act as a barrier to entry for new competitors. Similarly, high tariffs restrict competition and harm the end consumer. The concept of barriers to entry emerged after World War II, when industrial economists sought to explain the persistence of high profit margins in highly concentrated sectors.

High market concentration in emerging industries can act as a barrier to entry for new competitors. Similarly, high tariffs restrict competition and harm the end consumer. The concept of barriers to entry emerged after World War II, when industrial economists sought to explain the persistence of high profit margins in sectors with strong market concentration.

Theoretically, in markets without barriers to entry, competition should lead to a normalization of profits over time. In the case of Mexico, these barriers are linked to the 20th-century economic growth model, particularly the Import Substitution Industrialization (ISI) model, which promoted high tariffs and a closure to foreign trade to protect local industry. This generated commercial isolation, high prices, and low quality for consumers.

Although this model began to be dismantled in the 1980s, current threats of tariff wars, such as those promoted by Donald Trump, have revived fears of a return to that system. In theoretical terms, barriers to entry allow established firms in concentrated markets to distort the efficient allocation of resources and prevent the entry of new competitors, thereby affecting investment and competitive dynamics.

These barriers alter companies’ expectations of future profits and are therefore considered structural conditions inherent to the market. The relationship between barriers to entry and economic well-being is analyzed by assuming the existence of an authority capable of applying the principle of marginal cost and regulating the number of participants in a market, which could generate an excessive number of companies relative to the equilibrium that maximizes social welfare.

It is therefore up to the Mexican competition authority to determine when a barrier is a natural result of the market and when it should be dismantled to improve its functioning. An example is the case of Uber, where initial concentration is normal, but without barriers, competition will increase over time and benefit consumers with better prices and quality.

Finally, eliminating barriers such as tariffs is key to normalizing prices, improving quality, increasing investment, and increasing production in the Mexican market, with a direct positive impact on the well-being of the population.

Leal, R. (2025, May 8). Tariffs and Barriers to Competition in Mexico. El Financiero.

https://www.elfinanciero.com.mx/monterrey/2025/05/08/ruben-leal-aranceles-y-barreras-a-la-competencia-en-mexico/