Mexico Proposes Tariff Cuts Tied to US-Origin Auto Components

The Mexican government is in active negotiations with the United States to secure preferential tariff treatment for automobiles, steel, and aluminum exports. Minister of Economy Marcelo Ebrard announced that a new proposal from the Trump administration could lower tariffs on vehicles based on their brand, model, and the percentage of US-origin components used in their production.

Ebrard explained that President Donald Trump has imposed a 25% tariff on all foreign-made vehicles unless they meet USMCA rules of origin. However, he noted that Mexico might qualify for a differentiated approach.

“We have an advantage as the most integrated automotive industry with the United States globally. Discounts will be applied using this criterion,” Ebrard stated during a press event.

He emphasized that these negotiations are a key outcome of his recent visit to Washington, with additional technical meetings scheduled for Easter week to address tariffs in the automotive sector, as well as on steel and aluminum. The aim, he noted, is to lower the 25% tariff rate to 18%, 17%, or even 16%, while ultimately advocating for complete tariff elimination.

“If all countries face a 25% tariff and we can negotiate a reduction to 18% or 16%, we will be in a stronger position,” Ebrard explained.

These discussions are part of broader conversations about what Ebrard described as a “new commercial order,” signaling potential shifts in global trade dynamics. He likened the current scenario to the implementation of the original NAFTA agreement in 1994, suggesting that this moment could redefine established trade norms.

“There is a new commercial order emerging. Its structure is not yet clear, but it will differ from what we have known,” he remarked.

One prominent case illustrating the impact of tariffs is the Audi Q5, manufactured in Puebla and the brand’s top-selling model in the United States. According to company sources, the tariffs have rendered the vehicle “unsellable” in the United States. The Q5 faces a 25% tax on non-US components, a 25% tariff at the border, and an additional 2.5% penalty for failing to meet USMCA requirements.

Ebrard also confirmed ongoing discussions with US trade representative Jamieson Greer regarding steel and aluminum tariffs. He highlighted progress achieved through a strong bilateral relationship and mutual respect.

“Secretary Howard Lutnick has been attentive and respectful toward Mexico. His approach has been neither arrogant nor dismissive,” Ebrard noted, emphasizing the constructive tone of the dialogue.

He added that the USMCA review is slated for the second half of the year. For now, the focus remains on resolving tariff issues related to autos and metals. “We are addressing one issue at a time. Today, there are steel, aluminum, and automotive discounts. The treaty review will follow,” he concluded.