Mexico Nears US Deal to Cut Auto, Steel and Aluminum Tariffs

Mexican trade officials are growing increasingly confident in reaching an interim commercial agreement with the United States to reduce steep American tariffs on key exports, including light vehicles, steel, and aluminum, according to government sources familiar with the negotiations.

The bilateral talks come amid a broader slowdown in nearshoring activity and foreign investment in Mexico, driven by uncertainty surrounding the upcoming annual review of the USMCA.

Under the terms currently being negotiated, Washington would lower its tariffs on light vehicles originating from Mexico from 25% to 15%. Because the full tariff rate applies strictly to non-US content, Mexican officials estimate that the effective tariff burden on light vehicles would settle between 10% and 12%.

However, Mexican negotiators continue to push for concessions superior to those granted to Canada last month. Washington offered Ottawa a nominal rate of 15%, which can drop to roughly 7% after applying the maximum allowable regional content discount.

Mexican officials are also working to secure reductions on American tariffs covering steel and aluminum exports, which currently sit at 50%. While negotiations on metals remain active, sources noted that the precise extent of potential tariff cuts remains undetermined.

Tariff relief remains a critical economic priority for Mexico’s automotive sector, which directly employs approximately 800,000 workers and exports the vast majority of its vehicle production to the United States. Mexico also stands as the primary foreign supplier of auto parts to the US market. Similarly, domestic steel and aluminum producers face intense operational pressure due to their heavy reliance on the US as their primary export destination.

Policy experts emphasize that any reductions to existing Section 232 or Section 301 tariffs will require reciprocal concessions from Mexico.

“It is difficult to imagine that the White House will reduce existing Section 232 and Section 301 tariffs without asking Mexico for something in return,” stated Diego Marroquín, a scholar at the Center for Strategic and International Studies (CSIS) Americas Program, and Juan Baker, a fellow at the Georgetown Americas Institute, in a joint analysis.

According to their analysis, Mexico seeks not only immediate duty reductions on primary export lines but also formal protection against future American tariff measures. In exchange, Washington’s demands could range from limited administrative and regulatory modifications to broader shifts in Mexican trade policy, export controls, transshipment regulations, supply chain security protocols, and strict measures targeting non-market economies—specifically China.

The trade talks coincide with official findings indicating that trade friction and regulatory hesitation are weighing heavily on real-economy investment. A report by consulting firm Deloitte highlights that while Mexico maintains structural competitive advantages through North American supply chain integration, corporate capital decisions have become decidedly more cautious throughout 2026.

Deloitte's Investment Monitor revealed that foreign direct investment (FDI) reached US$34.9 billion during the first half of 2026. However, net new investments fell by 23% compared to the same period in 2025. Furthermore, companies made only 73 investment announcements in the first half of 2026—a 55% decline year-over-year. The aggregate value of these announced investments fell 20.7% interannually to US$36.353 billion.

Deloitte noted that the deceleration in investment announcements demonstrates that nearshoring’s potential has not yet yielded a widespread investment cycle, creating headwinds across manufacturing. Execution delays remain significant: out of US$286.3 billion in announced investments recorded between 2023 and June 2026, only 11.3% have entered operational status, while 42% remain under construction. New market opportunities remain heavily concentrated in the energy, food and beverage, and transportation sectors, primarily in Mexico's northern and Bajío regions.

Private sector leadership has emphasized that corporate reinvestment remains steady despite broader headwinds. Susana Duque, general director of the Mexican Business Council for Foreign Trade, Investment and Technology (COMCE), observed that growth in capital reinvestment reflects sustained corporate confidence from existing market participants retaining profits locally. She added that Mexico has climbed to tenth place among the world’s top FDI recipient economies.

Addressing structural hurdles remains critical to unlocking capital execution. Juan Castañón, vice president of COMCE, noted ongoing investor concerns regarding Mexico’s legal framework and the mixed investment law, particularly surrounding required capital deployment in the energy sector. Business leaders expect that government measures to streamline administrative procedures, alongside the formal ratification and resolution of the USMCA review, will help resolve investor uncertainty.

Diplomatic engagement on these critical trade subjects continues at the executive level. Mexican Economy Minister Marcelo Ebrard met with US Trade Representative Jamieson Greer in Milwaukee, Wisconsin, on the sidelines of the G20 Trade Ministers' Meeting. The G20 trade forum, taking place Sep. 30 and Oct. 1, covers global trade topics including the elimination of forced labor in supply chains, updates to Most-Favored-Nation principles, global production overcapacity, food-related trade measures, and supply chain resilience.

The high-level talks between Ebrard and Greer focused heavily on bilateral trade priorities, including cross-border supply chains, metals and auto tariffs, and trade measures involving Asian imports. Formal negotiations between Mexico and the United States regarding the USMCA review framework are scheduled to resume in October.