US FDI Makes Up One-Third of Mexico’s Auto Sector

The United States accounted for 31.9% of total foreign direct investment (FDI) in Mexico’s automotive sector, raising concerns among investors following US President Donald Trump’s recent proposal to impose a 25% tariff on vehicles. 

From 2006 through the 3Q24, FDI inflows to Mexico’s auto and truck manufacturing sector reached US$47.096 billion, with US$15.016 billion originating from the United States. During the same period, Mexico also attracted US$38.115 billion in FDI for the production of various auto parts, with the United States contributing 21.8%, according to the Ministry of Economy.

In 2024, Mexico’s automotive exports totaled US$188.903 billion, representing 31.9% of the country’s total exports. At the end of January, Matt Blunt, President, American Automotive Policy Council (AAPC), argued that vehicles and auto parts that comply with the USMCA should be exempt from tariffs, stating that “these vehicles and parts meet the standards originally negotiated by President Trump to support US employment and investment.”

After the United States, Japan ranked as the second-largest source of FDI in Mexico’s auto and truck production, contributing US$13.198 billion, followed by Germany at US$9.011 billion. Other contributors included South Korea with US$3.368 billion, the Netherlands with US$1.951 billion, and Italy with US$1.760 billion. China contributed US$184 million in FDI to Mexico’s automotive production.

Trump's New Tariffs on Automobiles: Implications for Trade and Industry

On Feb.18, President Donald Trump revealed plans to impose 25% tariffs on auto imports, as well as on semiconductors and pharmaceuticals, with implementation potentially starting as early as April 2. This follows his previous actions, including a 10% tariff on Chinese goods and 25% tariffs on steel and aluminum. Trump indicated that the tariffs on semiconductors and pharmaceuticals could rise further over time, but he stressed that companies would have time to relocate production to the US to avoid the tariffs.

This move is part of his broader effort to create a more balanced trade environment and bring critical industries back to the United States. Trump has long criticized the treatment of United States exports in foreign markets. Experts warn that these new tariffs could result in higher prices for consumers, particularly in the automotive sector, and increased operational costs for businesses.