Rising US Tariffs Reshape Mexico’s Auto, Aerospace Costs

Mexico’s automotive and aerospace sectors are undergoing significant structural adjustments in response to rising US tariffs and evolving trade conditions. Between January and May 2025, Mexico’s light vehicle exports fell 6.3% according to Prodensa, while aerospace growth slowed to 9%—below post-pandemic averages, noted FEMIA Director General Luis Lizcano.

A new US tariff framework introduced in 2025 imposes duties ranging from 25% on vehicles and parts with non-US content to 50% on steel and aluminum. These measures are reshaping cost structures for Mexican manufacturers and forcing companies to reevaluate production strategies, supply chains, and investment plans.

During the first five months of 2025, light vehicle exports declined 6.3% and overall vehicle output fell 5% year-over-year. Heavy-duty vehicle production dropped nearly 20% amid rising input costs. While 92% of auto parts produced in Mexico still meet USMCA content thresholds, complex multinational supply chains mean even qualifying products may face tariffs if US content is not maximized.

Companies are adjusting accordingly. Stellantis suspended production at its Windsor plant in Canada due to tariff-related cost pressures and indicated potential impacts on Mexican operations. Nissan announced the closure of its CIVAC plant in Morelos by the end of FY2025, shifting production to Aguascalientes, its largest facility in Latin America. General Motors is moving some assembly from Mexico to the United States, supported by a US$4 billion investment in EV and gasoline vehicle production. Meanwhile, BYD canceled plans for an EV plant in Mexico, citing commercial uncertainty amid US–China tensions and a protectionist US trade stance.

The Minister of Economy Marcelo Ebrard has promoted the “Hecho en México” initiative as part of Plan México, aiming to strengthen domestic production, reduce unnecessary imports, and reinforce Mexico’s global trade position. Ebrard emphasized leveraging USMCA rules of origin to maintain tariff-free access to the US market, while negotiating more favorable conditions than competitors like Japan or Germany.

The aerospace sector also faces challenges. FEMIA reported 9% growth in the first half of 2025, below the 13–16% post-pandemic annual average. Lizcano attributes the slowdown to US tariffs on metals—25–50% on steel and aluminum—key materials for aircraft components.

Despite these headwinds, Mexico remains  a top aerospace investment destination, ranking fifth globally for foreign direct investment and twelfth in aerospace exports. The industry supports over 240,000 direct and indirect jobs and is expected to double in value by 2029. Key players such as Airbus, Safran, and Latécoère continue expanding operations, attracted by a skilled workforce, competitive costs, and proximity to US assembly lines. Lizcano cautioned that sustained investment depends on trade stability and stronger local content strategies, noting FEMIA’s active role in USMCA review discussions to protect Mexico’s North American supply chain integration.

As the USMCA 2026 review approaches, both industries are intensifying efforts to meet stricter compliance standards, including content traceability, origin documentation, and alignment with US and Canadian regulations. 

Follow our MBS 2025 tag and do not miss our coverage leading to Mexico Business Summit 2025 on October 28–29, 2025. On Tuesday, July 29, 2025, we will delve into how supply chain optimization can help companies counter geopolitical uncertainty. 

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