Mexico Presses US Over Higher Tariffs on Vehicle Exports

Mexican government officials have presented evidence during trade negotiations showing that automobiles manufactured in Mexico face a higher average tariff when entering the United States than vehicles imported from South Korea and Japan. According to an internal document reviewed by Bloomberg News, the average effective tariff on Mexican vehicle exports is approximately 19%, while certain vehicles imported from the two Asian countries are subject to a lower flat tariff of 15%.

The data highlights an ongoing concern raised by Mexican automakers during the current six-year review of the USMCA. The trade agreement, which entered into force on July 1, 2020, includes a mandatory review clause. Negotiations are progressing slowly, and officials indicate that the scheduled July 1 review deadline will likely be missed.

US Trade Representative Jamieson Greer and his team have acknowledged the discrepancy, telling Mexican negotiators that vehicles assembled in Mexico should, in principle, enjoy a more favorable trade position than those imported from non-regional countries. While US officials are reportedly exploring possible solutions, people familiar with the discussions said the US delegation does not necessarily agree with the specific calculations presented by Mexico.

US trade policy remains closely aligned with the administration's broader economic agenda. "My team and I have been working on protocols regarding rules of origin to ensure that products traded between both countries are truly made in the US and/or Mexico, and are not simply composed of a large number of parts coming from China or Vietnam," Greer said in an interview with Fox Business.

US trade officials have also warned that any final agreement with Mexico remains contingent on President Donald Trump's approval. Trump has argued that tariffs, which generate billions of dollars in revenue, help protect the domestic economy. Following a February US Supreme Court decision overturning his original broad global tariffs, the administration introduced alternative levies, including a recent 10% tariff on goods allegedly produced using forced labor. The White House referred requests for comment to the Office of the US Trade Representative, which declined to comment.

The current imbalance stems from separate trade agreements reached last year between the United States, South Korea and Japan. In exchange for a combined US$900 billion investment in the United States, the Trump administration capped certain automotive tariffs at 15% for those two countries without imposing comparable regional-content requirements.

By contrast, under the USMCA framework, Mexican vehicles and certain automotive components face baseline tariffs of up to 25%. The effective tariff calculation is complex because US-manufactured components are exempt from the levy, reducing the final rate below the 25% ceiling for many vehicles.

To qualify for duty-free treatment under the USMCA, a vehicle must demonstrate that 75% of its components originate in North America, while also meeting stringent labor and value-content requirements. If a Mexican-made vehicle fails to satisfy these criteria, it is subject to the full 25% tariff plus an additional 2.5% Most-Favored-Nation (MFN) duty.

According to two automotive industry sources who spoke on condition of anonymity, the administrative burden and compliance costs associated with verifying these rules of origin add an estimated 3% cost penalty for Mexican manufacturers, eroding the economic advantages of preferential market access.

Mexican Economy Minister Marcelo Ebrard criticized the asymmetrical regulatory framework, noting that compliance can require tracking as many as 18,000 individual components per vehicle to verify North American origin.

"The United States applies a fixed 15% tariff to South Korea, which is a major competitor of Mexico in the automotive sector, and to Japan, which produces some of the best steel in the world, without imposing rules of origin," Ebrard said at an industry event in May. "That means they can import whatever auto parts they want."

According to the document reviewed by Bloomberg, the average effective tariff paid across all Mexican vehicle models imported into the United States stands at 18.75%. Under this scenario, a US$50,000 vehicle manufactured in Mexico incurs US$9,375 in tariffs, compared with US$7,500 for an identical vehicle imported from Japan or South Korea.

Data from the 2025 American Automobile Labeling Act highlights significant differences in regional content among vehicles assembled in Mexico. High-compliance models include the Kia EV6, with 80% North American content, and the Honda Ridgeline TrailSport, with 75%. By contrast, luxury models rely heavily on global supply chains: the Audi Q5 contains just 2% North American content, while the Mercedes-Benz GLB SUV contains none.

Most vehicles produced in Mexico fall into an intermediate category, with approximately 50% regional content. This structural disadvantage has prompted several Asian automakers to reassess their manufacturing footprint in the country. In October, Nissan announced it would end production at its COMPAS assembly plant in Aguascalientes.

"While we do not disclose a specific effective USMCA tariff rate, it is fair to say that, under the current framework, the exposure of vehicles assembled in Mexico may be higher than some of the negotiated tariff outcomes applied to imports from other regions," a Nissan Americas spokesperson said in an official statement. "Our focus remains on maintaining a competitive environment that supports the production of affordable vehicles."

The automotive manufacturing sector is a cornerstone of the Mexican economy, accounting for 4.5% of the country's gross domestic product (GDP). President Claudia Sheinbaum has recently introduced measures to support the industry by reducing bureaucratic hurdles and implementing targeted tax incentives. At the same time, the US administration is seeking to revive its domestic automotive industry, whose contribution to US GDP has declined from roughly 5% in previous decades to 2.3%.