Mexican Senate Clears Tariff Reform, Sends It to Executive Branch

Mexico has approved one of its most significant tariff overhauls in recent years with the reform of the Law of General Import and Export Taxes (LIGIE), a move aimed at strengthening domestic industry, correcting trade asymmetries, and reducing dependence on imports from countries without free trade agreements.

The reform was approved last week by the Chamber of Deputies with 281 votes in favor, 24 against, and 149 abstentions, and later ratified by the Senate of the Republic with 76 votes in favor, five against, and 35 abstentions. The decree has now been sent to the Executive Branch for enactment.

At its core, the reform updates Mexico’s tariff schedule to modify 1,463 tariff lines across 17 strategic sectors, introducing higher import duties on selected products originating from countries with which Mexico does not have a free trade agreement. These include China, South Korea, India, Vietnam, Thailand, Brazil, Indonesia, Taiwan, Nicaragua, the United Arab Emirates, and South Africa.

According to lawmakers, the objective is not blanket protectionism but a targeted industrial policy tool to address unfair trade practices, import substitution, and structural asymmetries in global trade, particularly in sectors where domestic production capacity exists but has been displaced by low-priced imports.

The reform focuses on industries considered strategic for employment, value chains, and nearshoring potential, including:

• Auto parts and light vehicles

• Textiles, apparel, footwear, leather goods, and furniture

• Plastics, aluminum products, steel, and ironworks goods

• Household appliances, toys, glass products, paper, and cardboard

• Motorcycles, trailers, cosmetics, perfumery, and cleaning products

Miguel Ángel Salim, President, Chamber of Deputies’ Economy, Trade, and Competitiveness Commission, explains that the restructuring seeks to incentivize national production, substitute imports, and strengthen domestic value chains, particularly in sectors exposed to competition from non-FTA economies.

Key Provisions and Economic Impact 

One of the most relevant changes introduced during the legislative process was proposed by Ricardo Monreal, President, Joint Coordination Board (JUCOPO). This amendment added a Fourth Transitory Article, granting the Ministry of Economy the authority to deploy legal instruments and mechanisms to guarantee the competitive supply of essential inputs, particularly for industries that rely on imported intermediate goods.

This provision is designed to prevent supply disruptions or cost shocks, especially in cases where domestic substitutes are not immediately available.

The reform sparked extensive debate around its inflationary implications. MORENA lawmakers argued that the impact on consumer prices would be minimal, as most modified tariff lines have low weight in the National Consumer Price Index (INPC). Deputy Claudia Ávila stated that any potential effect on the basic consumption basket would be limited to around 0.03%.

Opposition lawmakers, however, called for caution. Representatives from the PT and PRI warned that abrupt tariff increases on intermediate goods could generate short-term cost pressures for domestic producers, while Movimiento Ciudadano stressed the need for a comprehensive industrial policy to accompany tariff adjustments, including fiscal incentives, credit guarantees, and substitution programs.

In the Senate, MORENA framed the reform as a cornerstone of a new development model aligned with Mexico’s nearshoring strategy. Senator Emmanuel Reyes described it as a necessary step to correct trade distortions, address unfair competition, and reduce excessive import dependence.

Other parties echoed the need for a broader policy framework. PAN Senator Miguel Márquez emphasized that tariffs alone are temporary tools and must be complemented with financing, infrastructure, innovation, legal certainty, and security to truly support reindustrialization.

Industry Reactions

Mexico’s industrial chambers broadly welcomed the reform, viewing it as a long-awaited correction to trade imbalances.

The Confederation of Industrial Chambers of Mexico (CONCAMIN) publicly expresses its full support, highlighting that the reform resulted from sustained dialogue between the private sector, legislators, and the Ministry of Economy. CONCAMIN says that the changes strengthen the regulatory framework for foreign trade, safeguard domestic production against harmful practices, and align with the objectives of Plan México to consolidate strategic value chains and increase national content.

The National Chamber of the Iron and Steel Industry (CANACERO) describes the reform as a fundamental step to confront unfair trade practices and restore competitiveness in the steel sector, particularly in the context of declining exports and weakened domestic demand. CANACERO underscores that higher tariffs on steel products from non-FTA countries support import substitution, regionalization in North America, and alignment with industrial policies adopted by Mexico’s main trading partners.

Similarly, the National Chamber of the Textile Industry (CANAINTEX) backs the tariff adjustments, noting that they help restore fair competition in a sector that has suffered from under-invoicing, contraband, and prolonged contraction in manufacturing GDP. CANAINTEX stressed that the effectiveness of the measure will depend on strong customs enforcement, traceability, and alignment with customs law reforms, and reiterated its willingness to collaborate with authorities during implementation.

From a corporate and tax strategy standpoint, Ari Saks, Associate Partner of Tax and Nearshoring Investment Services Coordinator, EY Mexico, explains that the new tariffs will likely trigger adjustments across supply chains rather than immediate price shocks. Higher tariffs on inputs sourced from non-FTA countries may increase production costs in the short term, but they also create incentives for companies to explore local suppliers or diversify sourcing strategies, says Saks. Over time, this dynamic can encourage innovation, improve supply-chain resilience, and enhance operational efficiency.

Saks notes that automotive, textile, and household appliance manufacturers are among the sectors most exposed to the changes. However, he adds that companies can adapt by investing in technology, improving process efficiency, and forming strategic partnerships with domestic suppliers, reinforcing local value chains.

The reform can lead to a stronger manufacturing base in Mexico, which could increase demand for locally produced goods, open access to new markets, generate employment, and accelerate workforce skill development, says Saks. While challenges remain, he underscores that the resilience and adaptability of Mexico’s private sector will be decisive in turning the tariff reform into sustainable economic growth.