Mexico’s Auto FDI Down 41% Amid Tariffs, Economic Slowdown

Foreign direct investment (FDI) in Mexico’s automobile and truck production dropped 41% year-on-year in 1H25, totaling US$3.59 billion, according to preliminary data from the Ministry of Economy (SE). The decline follows a record inflow of US$6.09 billion in the same period of 2024.

FDI in auto parts manufacturing also fell, down 24.6% to US$1.23 billion. Both figures are provisional and mark a sharp reversal after two consecutive years of record inflows.

“The climate of uncertainty stemming from US tariff policies and the global economic slowdown are factors behind the lower FDI flows,” said Gabriel Padilla, General Director, National Auto Parts Industry Association (INA).

Padilla noted the association will not issue forecasts for 2025 or 2026 but anticipates a rebound beginning in 2027. “Tariff negotiations and the USMCA review will be decisive for reactivating investments. We expect Mexico to secure more favorable terms than other countries by 2027,” he said.

He added that the industry is preparing for a new investment phase: “We are anticipating what we call New Shoring 2.0, especially in high-tech parts and components tied to the electromobility market.”

The United Nations Conference on Trade and Development (UNCTAD) highlighted in a recent report that trade uncertainty often pushes companies to adjust quickly by pausing shipments, renegotiating contracts, or accelerating deliveries ahead of potential tariff hikes, creating erratic trade patterns.

This trend was evident in early 2025, when fluctuations in shipments to the United States spiked. “Uncertainty itself can be more destabilizing than tariffs,” UNCTAD stated.

The agency also stressed that trade agreements help mitigate volatility by setting clear rules and dispute resolution mechanisms, reducing the risk of abrupt policy shifts. “Companies operating within regional or bilateral frameworks tend to face fewer disruptions and greater confidence to invest long-term, even amid global political turbulence,” the report said.