Backdrop & Context
As global trade dynamics continue to shift in a post-pandemic, protectionist era, the relationship between the United States and Mexico has once again come under strain. In April 2025, President Donald Trump reignited his hardline trade strategy, threatening to impose a 25% tariff on foreign-made automobiles and reinstating duties on steel and aluminium. The rhetoric, reminiscent of Trump’s earlier term, has sparked alarm in Mexico City, where the economy is heavily reliant on exports north of the border.
Mexico’s economy, worth over $1.47 trillion, ranks as Latin America’s second-largest and is deeply entangled with the US market. Nearly 81% of its exports, spanning cars, electronics, heavy metals, and agricultural produce, are shipped to the United States annually. “It’s not just a commercial relationship. It’s an economic umbilical cord,” said Professor Rodolfo García of El Colegio de México.
Who’s Involved?
The principal political actors are Mexican President Claudia Sheinbaum, Mexico’s first woman head of state, and US President Donald Trump, who has returned to office advocating “fair reciprocity” in trade. On the industrial front, major Mexican operations of global companies are affected. These include:
• Automotive Sector: General Motors de México, Nissan Mexicana, Volkswagen, and Ford operate expansive plants in Puebla, Guanajuato & Coahuila.
• Steel & Aluminium Producers: Ternium México, ArcelorMittal, Deacero & AHMSA produce over 18 million metric tons of metal annually, with 40% destined for export.
The Trump administration justifies the proposed tariffs under Section 232 of the Trade Expansion Act of 1962, citing national security concerns, a clause used controversially in previous trade battles.
Export Dependence Raises Alarm
The stakes for Mexico are profound. In 2024 alone, Mexico exported:
• $77 billion in automobiles & auto parts
• $11.9 billion in steel & aluminium
• $43 billion in electronics
• $23 billion in oil & refined products
A 25% tariff could cost the Mexican economy nearly $12 billion annually, according to Banxico projections. “Every 1% tariff equates to approximately $500 million in lost competitiveness,” stated Gustavo Hoyos, CEO of COPARMEX, Mexico’s employers’ federation.
The automotive industry employs over 980,000 people directly and nearly 3 million indirectly. A tariff shock would not only damage Mexico's employment but also disrupt the integrated supply chains of North America, where parts and components are shared across borders.
Mexico’s Counterproposal: Zero Tariffs for USMCA-Compliant Goods
In her morning press briefing, President Sheinbaum revealed that Mexico has proposed a zero-tariff framework for metals and automotive products that meet USMCA-origin requirements, which stipulate 75% regional content in vehicles and specific sourcing of core materials like steel, aluminium & lithium.
“Under the USMCA, we’ve already aligned with labor, sourcing, and environmental norms. Our offer is simple, no tariffs for compliant goods,” Sheinbaum asserted. She emphasized that Mexican steel and aluminium already meet stringent quality and traceability standards, monitored through the Red de Laboratorios de Metales de América del Norte, RELMAN.
She also noted a critical asymmetry: “In 2024, the US exported $3.8 billion worth of steel & aluminium to Mexico, 22% more than what we sent north. Who is really benefiting?”
The 25% Automotive Sword of Damocles
The most contentious point remains the potential 25% tariff on Mexican-assembled automobiles. Trump claims the move is necessary to reverse the "offshoring of American auto jobs,” despite the fact that many US automakers rely on Mexican plants for assembly & logistics efficiency.
Mexico’s automotive sector is particularly integrated with the US and Canada. Vehicles may cross borders up to 7-8 times before final assembly. A sudden tariff imposition could raise the average car price in the US by $1,300–$2,500 and cause a 15–20% contraction in Mexican car exports.
Mexico has reportedly offered a sectoral compromise that includes:
• Quota ceilings on finished vehicle exports
• Battery & EV component traceability
• Stricter labor audits in northern Mexican plants
• Additional emissions reporting under USMCA annexes
Supply Chain Shockwaves Across North America
North America’s manufacturing framework is built on synchronized logistics and lean inventory systems. The auto, electronics, and energy sectors all operate across trinational platforms. Trump’s tariff threats risk derailing this structure.
According to data from SAT (Mexico’s Tax Administration Service), over 9,500 cross-border trucks carry parts daily across 56 land ports. Any disruption could create weeks-long delays, destabilize assembly schedules & inflate consumer prices.
“In today’s world, trade wars no longer hurt ‘the other side’, they hurt both,” said Marco Hernández, regional director at Deloitte Mexico. “These decisions carry a cascading effect from Chihuahua to Detroit.”
Global Reverberations & Industrial Anxiety
Beyond North America, investors in Europe, Japan, and China are watching closely. Several global OEMs like BMW, Honda & Toyota export vehicles from Mexico to over 50 countries. A change in tariff conditions would compel them to reconsider production strategies.
Market reaction has been jittery. The Mexican Peso fell 1.6% against the $ on April 20, while shares of key industrial firms like Nemak and Grupo Industrial Saltillo dipped by 3–5%. Meanwhile, European Union trade ministers have urged the US to honor the spirit of USMCA and avoid “discriminatory industrial measures.”
Despite the pressure, both leaders have signaled that talks will continue. “It was a productive conversation,” said Sheinbaum of her call with Trump. “We will keep dialogue open for the benefit of both nations.”
Key Takeaways:
• President Claudia Sheinbaum confirmed that Mexico has not yet reached a trade deal with the US.
• Trump’s proposed 25% tariff threatens Mexico’s $77 billion auto export industry.
• Mexico’s steel & aluminium exporters seek zero-tariff status under USMCA rules.
• Mexico exports over 81% of its goods to the United States, creating high economic exposure.
• Proposed tariffs could lead to job losses, price hikes & supply chain disruption across North America.
• Talks between the two nations remain ongoing, with Mexico proposing EV carve-outs and labor guarantees.
