Mexico Rejects US Tariff Threat, Citing Deep Auto Industry Ties

The Mexican automotive industry is facing potential disruptions due to the threat of tariffs from the United States. Industry leaders warn that these tariffs could impact supply chains, investment, and vehicle costs. However, they call the possibility of relocating production to the United States unrealistic given the deep integration of manufacturing operations across North America.

"It has taken years to integrate all the production chains. Relocating a plant is highly complicated," says Rogelio Garza, President, Mexican Automotive Industry Association (AMIA), during the El Financiero Meet Point forum.

Garza says that Mexico hosts 42 manufacturing plants operated by 13 brands, producing nearly 4 million light vehicles annually. Of these, about 3.4 million are exported, with 80% going to the United States. Setting up shop in the United States would be an expensive and time consuming process for these plants. "The construction of a plant, along with the integration of suppliers, takes around ten years. It is not feasible to move all of that production to the United States in that timeframe," says Garza.

The US administration's proposed tariffs, set to take effect on April 2, are expected to impact the automotive sector significantly.  "Auto parts cross the USMCA borders between seven and eight times during production. The proposed tariffs will create significant uncertainty and disruptions," says Francisco González, Executive President, National Auto Parts Industry (INA). He also warns that tariffs on steel, aluminum, and other components could cause distortions in the industry.

González highlights that 43% of the United State’s auto part imports come from Mexico, with an additional 10% from Canada, making North America heavily interdependent in manufacturing. He adds that 72% of imported vehicles in the United States are assembled in Mexico, meaning any tariffs on parts or finished cars would have a broad impact on costs.

"I do not see the feasibility of this tariff war persisting. Economic realities and ongoing negotiations will likely prevent the continuation of policies that increase costs and threaten economic development," says Guillermo Rosales, President, Mexican Association of Automotive Distributors (AMDA).

Rosales warns that prolonged tariffs on steel and aluminum — and the potential for further duties on other Mexican products — could lead to higher prices for consumers in the United States, and economic repercussions for the region.

"The key challenge is to compete as a North American region against Asia, which accounts for 58.9% of global vehicle production," says Garza. He adds that maintaining an integrated supply chain is essential for keeping North American manufacturing competitive.

"The Mexican auto parts sector generates approximately US$108 billion in revenue annually and employs 880,000 workers in over 2,000 production plants," says Rosales.