Mexico Pushes to Trim US Tariffs on Non-USMCA Vehicles

President Donald Trump described the United States–Mexico–Canada Agreement (USMCA) as “irrelevant” during a visit to a Ford Motor plant in Dearborn, Michigan, reiterating that “we do not need cars made in Mexico.” Trump said the agreement, which is legally subject to review this year, “has no real advantage,” arguing that US manufacturing is increasingly attracting production from Canada, Mexico, and other countries.

Meanwhile, Mexico has requested that the United States reduce the tariff on cars that do not meet USMCA rules of origin from 27.5% to 15%, Economy Secretary Marcelo Ebrard announced on Jan. 15. Currently, the US applies a 2.5% Most-Favored-Nation tariff plus an additional 25%, with discounts based on the US content of vehicles imported from Mexico and Canada.

Rules of origin determine whether a product qualifies for tariff benefits based on regional content. Ebrard explained that these discounts effectively lower tariffs on Mexican passenger vehicles and trucks to about 13%. The US has applied similar reductions to 15% for Japan, South Korea, and the European Union, and to 7.5% for a quota of 100,000 vehicles from the United Kingdom.

Mexico is seeking tariff alignment to ensure that Mexican-built vehicles are not priced higher than those produced in other countries. Ebrard noted that light-vehicle exports fell 2.7% in 2025 to 3.385 million units, a smaller decline than initially projected, partly due to the US decision to end US$7,500 subsidies for new electric vehicles, a segment in which Mexico had previously shown strong growth.

When asked about renegotiations with Mexico and Canada, Trump said, “I don’t even think about the USMCA,” adding that while he wants Mexico and Canada “to do well,” domestic production remains the priority. “We do not need their product. We do not need cars made in Canada. We do not need cars made in Mexico. We want to make them here,” he said, adding that companies are relocating production to the US from Canada, Mexico, Japan, Germany, and elsewhere.

Trump has threatened to terminate the USMCA or replace it with separate  bilateral agreements. The remarks come amid industry concerns that changes to the treaty could raise costs and weaken competitiveness. Automakers including Volkswagen, Nissan, and General Motors have warned that stricter rules or higher tariffs would increase costs and disrupt North American supply chains.

Mexican President Claudia Sheinbaum expressed confidence in a constructive outcome from the review process, acknowledging that tensions are likely but stressing that the treaty framework benefits all three countries. Canadian Prime Minister Mark Carney has said Trump has raised “dozens” of demands during negotiations, with 54 issues reportedly pending with Mexico alone.

According to the US Department of Commerce, the US trade deficit with Mexico reached US$171.8 billion in 2024, up 12.7% from 2023. Roughly 80% of that deficit stems from the automotive sector, where Mexico posted a record surplus of US$137.8 billion—more than double its 2014 level. Other countries with  large US automotive trade imbalances include Japan (US$53.0 billion) and South Korea (US$46.8 billion). The figures underscore the central role of cross-border automotive production in North American trade.

Major automakers including General Motors, Ford, Honda, Stellantis, and Nissan are particularly exposed to the 25% US tariff on vehicles assembled in Mexico or Canada. Financial Times data show that 18.3%, 12.8%, 11.9%, 10.0%, and 9.4% of their global vehicle sales, respectively, are produced in these countries for the US market. While more than half of vehicles sold in the US are manufactured domestically, the ability to redeploy idle US production capacity will be critical to mitigating the financial impact of tariffs.

Tariffs imposed under Section 232 during the Trump administration remain a key concern for Mexican authorities and industry groups. The Mexican Automotive Industry Association (AMIA) is pushing for their elimination, with its president, Rogelio Garza, noting that while US-content discounts help, the 25% tariff is “not ideal” and that Mexico’s objective remains zero.