Mexico Uses USMCA to Shield US$110 Billion in Auto Parts

Mexico’s government plans to invoke provisions within the USMCA’s parallel letters to safeguard its auto parts and vehicle exports from potential US tariff increases. This move aims to preserve tariff-free exports valued at up to US$110 billion in auto parts and 4 million light vehicles annually.

The government will present its case in Washington, highlighting the significance of the parallel letters, which underscore the North American auto industry's integrated supply chain rather than independent export operations.

Part of the Section 232 framework, these parallel letters provide a safeguard against security-based trade restrictions on Mexican and Canadian auto exports. They guarantee Mexico and Canada the ability to export vehicles and auto parts up to predefined limits without incurring additional tariffs, even if new tariffs are imposed.

“Mexico has mechanisms to ensure its auto sector remains competitive,” said Francisco González, president, National Auto Parts Industry (INA). He stressed the importance of maintaining these protections to preserve trade balance, attract investment, and support nearshoring trends amid the transition to electromobility.

The government has been collaborating with industry stakeholders and international organizations, including the Motor & Equipment Manufacturers Association (MEMA) in the United States. 

INA is also working on the "Mexico Plan" to attract manufacturers leveraging the USMCA framework. González noted recent discussions with Marcelo Ebrard, Mexico’s Minister of Economy, on strengthening local content and reducing reliance on imports.

The parallel letters, negotiated during NAFTA’s transition to USMCA, ensure an export quota of 2.6 million light vehicles and unlimited pickup trucks without tariffs. Auto parts exports valued at up to US$108 billion are also tariff-exempt. If enacted, the proposed 25% tariff on foreign-made vehicles under Section 232 would not affect Mexico’s quota.

Trade expert Moisés Zavaleta, who previously managed USMCA rules of origin negotiations for Mexico’s Economy Ministry, has reaffirmed the protection offered by these mechanisms. Zavaleta emphasized that Mexican-origin vehicles remain tariff-exempt under Section 232, with limited non-originating goods subject to a 2.5% Most-Favored-Nation rate.

A study by the US-based Center for Automotive Research (CAR) warned that a 25% tariff on auto imports could lead to 367,000 job losses in the United States and increase vehicle prices by approximately US$2,750 per unit.