Mexican Auto Parts Face US$24 Billion Risk from Tariffs

According to the National Auto Parts Industry (INA), the proposed 25% tariff increase could result in a US$24.1 billion loss in exports by 2025, jeopardizing the integration of the North American automotive sector. However, nearshoring is expected to drive over US$5.2 billion in investments between 2024 and 2025.

The INA estimates that Mexico's auto parts production will reach US$127.5 billion by 2025, with exports to the United States accounting for US$96.5 billion of that total. Should the proposed 25% tariffs take effect, it would significantly disrupt the sector. "We anticipate 4.1% export growth this year, but the figure is expected to drop to 1.5% by 2025 due to protectionist policies and global economic deceleration," said Gabriel Padilla, Managing Director, INA.

Approximately 400,000 jobs in the US automotive sector could be at risk, highlighting the interconnected nature of the North American market. Padilla emphasized, "This is an industry deeply integrated across the region. Tariffs would impact consumers, automakers, and suppliers on both sides of the border."

The United States relies on Mexican manufacturing, with 80.8% of light vehicles and 96% of heavy vehicles produced in Mexico being exported to the United States. Additionally, 90% of Mexican-made auto parts reach the United States under the USMCA.

Companies such as Ford, General Motors, and Stellantis, which rely on components from Mexico for 16%, 30%, and 28% of their vehicle production, respectively, would face stantial cost increases with the proposed tariff hikes. 

“The US automotive sector would collapse without Mexican-made components, especially for internal combustion vehicles,” said Alberto Bustamante, Director, National Agency of Automotive Sector Suppliers (ANAPSA). 

Bustamante added that any disruption in supply chains could trigger a bilateral trade crisis, primarily affecting the US economy. Automakers are already bracing for potential changes in trade policies. “We must remain adaptable to any adjustments, as we always have,” noted Fernando Maqueo, Marketing Manager, Honda Mexico.

Despite these challenges, nearshoring is providing a counterbalance. Investments in Mexico’s auto parts sector totaled US$2.3 billion by the third quarter of 2024, an 18% increase compared to the previous year. INA forecasts total investments of US$2.5 billion by the end of 2024 and US$2.7 billion in 2025.

Nearshoring has been driven by increased demand for electric vehicle (EV) components, as environmental regulations in the United States encourage the adoption of greener technologies. “Sales of electrical components, such as harnesses and other electronics, are growing at an annual rate of 15–17%, reflecting the shift toward electromobility,” Padilla stated.