Mexico Auto Parts Face US$6.3 Billion Blow from US Steel Tariffs

Mexico's automotive parts industry is bracing for an additional US$6.3 billion in costs following the implementation of a 50% US tariff on steel and aluminum imports. According to the National Auto Parts Industry (INA), the tariff will impact around 14% of Mexico’s auto parts exports to the United States, which totaled US$12.6 billion in 2024.

Julio Galván, INA’s Economic Studies Manager, highlighted that the tariff will elevate production costs for essential components like engines, body structures, brake systems, harnesses, and safety modules, thereby reducing the region's overall competitiveness.

In response, Mexico’s Ministry of Economy, Marcelo Ebrard, announced plans to negotiate an exemption for Mexico, akin to the 25% levy arrangement secured by the UK. Ebrard is scheduled to meet with US officials in Washington to discuss a potential resolution.

Mexico, the second-largest exporter of steel to the United States, risks losing over US$20 billion in annual steel, aluminum, and related product exports under the tariff. During a June 3 press conference at the National Palace, President Claudia Sheinbaum called the measure “unjust” and pointed out that Mexico imports more steel from the US than it exports.

President Sheinbaum also signaled that Mexico might impose reciprocal tariffs on US steel and aluminum imports if negotiations falter. “Our aim is to protect jobs, not retaliate,” she stated. “We remain hopeful for an agreement, but we are prepared to act if necessary.”

The United States imported US$31.4 billion in steel and aluminum auto parts in 2024, with Mexico accounting for nearly 39% of the total. The INA cautioned that rising costs could disrupt North America’s "just-in-time" supply chains, delaying production schedules and hindering exports.

According to industry sources cited by El País, the tariff hike could shrink Mexico’s GDP by 0.73% within a year. It also endangers over 380,000 jobs and US$7.5 billion in investments, emphasizing the policy’s potential economic toll.