Mexico Pushes Zero Tariffs on Auto Exports Ahead of USMCA

Mexico is prioritizing the elimination of tariffs on automobiles, steel and aluminum in upcoming discussions with the United States ahead of the review of the USMCA. President Claudia Sheinbaum said the objective is to restore pre-tariff conditions and ensure continuity in regional trade flows. 

Sheinbaum stated that “the priority of Mexico in the dialogue with the United States is that there be zero tariffs in the automotive industry, steel and aluminum,” in a press conference on March 20.The government’s position centers on preserving supply chain efficiency and reducing cost pressures that have affected production planning. The automotive sector, in particular, remains a key driver of exports and industrial output across the region.

Non-Tariff Measures and Sovereignty

The USMCA review is expected to address both tariff and non-tariff barriers. Sheinbaum indicated that Mexico will also seek targeted adjustments to the agreement, though without detailing specific provisions. “There are also some particular issues that have to do with improving the agreement,” she said, signaling openness to limited updates within the existing framework.

On non-tariff measures, Sheinbaum said most issues have already been resolved through prior consultations. “The Americans may or may not agree, but there has already been a process in which most of the measures have been settled,” she said. She emphasized that outcomes were achieved through clarification rather than concessions, adding: “It is not that there has been any concession, but simply that things have been explained, because it is our sovereignty.”

Tariffs on vehicles and key inputs such as steel and aluminum continue to affect cost structures and investment decisions. Mexico’s proposal to eliminate these duties aims to provide certainty for manufacturers operating across borders. The reference to restoring earlier conditions points to the period before tariffs were introduced, which had triggered retaliatory actions and adjustments within regional trade flows.

Tariff Costs and Industry Impact

Tariffs imposed during the administration of Donald Trump have generated significant costs for the global automotive sector. According to Automotive News, automakers incurred about US$35.4 billion in tariff-related expenses in 2025, reflecting the scale and speed of policy impacts on production, pricing and supply chains.

The financial burden has varied across manufacturers. Toyota projected tariff costs of US$9.1 billion for its fiscal year ending March 2026. General Motors, Ford and Stellantis reported a combined US$6.5 billion in 2025. Other automakers, including BMW, Honda, Hyundai-Kia, Mazda, Mercedes-Benz, Nissan, Subaru and Volkswagen, have each reported or projected more than US$1 billion in tariff-related costs.

Tariff structures vary by origin and product category, complicating production strategies. Imports from the European Union, Japan and South Korea face tariffs of around 15%, while Canada and Mexico are subject to 25% tariffs on non-US content. Steel and aluminum imports carry duties of 50%, increasing input costs. Electric vehicles from China face tariffs of up to 100%, reinforcing disparities in global cost structures.

Uncertainty over the duration and scope of these measures continues to affect investment decisions. Dan Hearsch analyst at AlixPartners said: “Knowing this will allow companies to make decisions about where to source parts or how to manufacture vehicles to avoid tariffs.” The lack of clarity has led companies to adjust sourcing strategies and delay long-term commitments.

Investment Uncertainty and Trade Alignment

Automakers initially absorbed a significant share of tariff costs to maintain competitiveness, but price increases have followed. Data from Catalyst IQ show that between the 3Q25 and February 2026, prices for vehicles assembled in Canada, Japan, Germany and Mexico increased faster than those produced in the United States. In Mexico, exports to the US declined 4.4% year over year in February 2026, according to INEGI, reflecting the combined impact of tariffs and uncertainty.

Industry representatives in Mexico and the United States have aligned in calling for the removal of a 25% tariff on vehicle exports. They argue that eliminating these measures is necessary to restore certainty and maintain competitiveness within North America. The continuation of Section 232 tariffs, which operate outside the USMCA framework, is viewed as a key risk to achieving the agreement’s intended benefits.

Rogelio Garza, President,AMIA, described the policy as “the worst-case scenario for Mexico if it remains unchanged.” He said “the sector’s request is its removal,” adding that interim solutions are under review but “that is not viable.” He also noted that authorities, including Minister of Economy Marcelo Ebrard, are aware of the need to resolve the issue before advancing in broader negotiations.

Garza said the tariff places Mexico at a disadvantage compared with other exporting regions. The United States applies tariffs of about 15% to imports from Europe, Japan and South Korea, compared with 25% for Mexican exports. “There may come a point where, instead of shipping from Mexico, companies decide to ship from Japan,” he said. He added that the measure creates uncertainty because it operates outside the USMCA, and emphasized that industry stakeholders on both sides of the border are aligned in seeking tariff-free trade and continued market access.