The world's smallest porpoise faces imminent extinction unless the Mexican government eliminates gill-net fishing in its only habitat, the upper Sea of Cortez, scientists have warned.

Recent studies conducted using underwater acoustic technology show that since 2012 the population of the vaquita marina – Spanish for little sea cow – has fallen to fewer than 100.

The sharp rise in gill-net fishing has been triggered by a booming illegal trade in the totoaba fish driven by Chinese demand for its swim bladder, which is believed to have medicinal properties.

The porpoises face being caught up in the nets and with mature females, probably now numbering about 25, typically giving birth to one calf every two years, the species could potentially be wiped out in a short space of timeby the end of the year.

"It is a critical situation," said Barbara Taylor, from the national oceanic and atmospheric administration in the US, and a member of the International Committee for the Recovery of the Vaquita, which carried out the latest study.

"It's time for Mexico to decide if it really wants to save the vaquita and be an example to the world, or a wake-up call for what gill nets can do."

Fine-meshed gill nets have long been identified as the only real problem the vaquitas face in the clean water of the sea, also known as the Gulf of California. The marine mammals, whose scientific name is Phocoena sinus, are particularly vulnerable to getting trapped and drowning in the nets used to catch totoaba, which are about the same size as the porpoise.

The current spike in totoaba fishing was apparently triggered by falling numbers of a similar fish caught in Chinese waters. There are unconfirmed reports that the trade is also being fuelled by drug traffickers developing new lines of business.

Lorenzo Rojas, a Mexican scientist on the committee, said fishermen told him buyers were offering $8,500 (£5,064) per kg at the end of 2012. The bladder of a mature fish weighs about half a kilo.

"It's a brutal incentive," Rojas said. "They can earn in a few catches what they would normally earn in a year."

Omar Vidal of WWF, which helps sponsor the committee, said: "We have run out of time and we cannot afford more mortalities