Mexico’s Auto Industry Warns of Trump Tariffs’ Impact

The automotive industry in Mexico is grappling with significant uncertainty due to potential tariffs proposed by former President Donald Trump. Trump has threatened punitive tariffs of up to 200% on cars imported from Mexico, a move that could disrupt production and the supply chain between the two countries.

In response, BMW executives acknowledged that such tariffs would hurt their business but affirmed that their San Luis Potosi plant would remain financially viable. The plant, which employs 3,700 workers, is highly automated and produces luxury sedans for export to markets including the United States, Europe, and China. However, the potential impact on suppliers could be severe.

"The tariffs could disrupt the supply chain, forcing suppliers to move production to other countries, which would result in job losses and financial turbulence," said Oliver Haase, Senior Vice President, BMW. 

“Our decision on where to build factories is a strategic decision made over at least 40 years,” said Ilka Horstmeier, Board Member, BMW. She also noted that the company’s decision to build and expand in Mexico was based on long-term strategic considerations. However, she added, “Anytime you put trade barriers in place, you hurt yourself.”

The EV sector in Mexico is also at risk. Companies such as Ford and Chevrolet produce electric vehicles, like the Mustang Mach-E and Equinox EVs, in Mexico. Tesla, which has plans for a Monterrey factory, is reportedly pausing developments as it awaits clarity on US tariff policies.

Beyond production, tariffs would disrupt the flow of components for both traditional and electric vehicles. Many parts used in BMW vehicles, such as EV batteries sourced from South Carolina, come from the United States. 

Chinese automotive manufacturers aiming to enter the Mexican market also face challenges. Companies like BYD are considering Mexico as a base for Latin American and US expansion. However, tariffs on Mexican exports could limit their access to the United States, where Chinese vehicles already face high tariffs. 

Mexico’s free trade agreements, especially the USMCA, give manufacturers access to markets across 50 countries.