US-Mexico Trade Talks Center on Quota System to Ease Tariffs

Trade negotiations between the United States and Mexico are advancing, with sources close to the discussions reporting significant progress toward a potential agreement. Talks are increasingly focused on establishing a tariff-rate quota system to lower tariffs on Mexican steel imports. Mexico currently ranks as the third-largest supplier of steel to the United States, accounting for 12% of total imported steel.

The emerging proposal, according to individuals familiar with the matter, would ease steep tariffs on specific steel products that are considered essential by US automakers and other manufacturers. However, this exemption, formally known as a tariff-rate quota (TRQ), would apply only to a restricted volume of imports, likely based on the average annual exports from Mexico to the United States between 2015 and 2017.

The goal of the quota is to reflect historical trade patterns and avoid rewarding the post-pandemic surge in imports, providing a more stable and predictable baseline for both countries. After assessing various timeframes, negotiators agreed that the 2015–2017 period offers the most balanced benchmark, according to two sources familiar with the talks.

Based on this benchmark, approximately 2,799,228mt of Mexican steel could enter the United States annually without incurring the 50% tariff, according to data from the United States Department of Commerce. Imports under this quota may still face a 10% base tariff, while volumes exceeding the cap would be subject to the full tariff rate. This proposed quota would represent 88% of the total steel that US buyers imported from Mexico last year, which amounted to 3,194,752mt.

The measure seeks to address opposition from US steel producers, who are concerned that a complete exemption for Mexican imports would hinder efforts to strengthen domestic production. By setting the quota below current demand levels, the United States aims to protect local industry while providing some relief to manufacturers reliant on Mexican steel. The quota also gives the administration flexibility to negotiate with a key regional partner without compromising its broader trade agenda.

A previous Bloomberg News report indicated that United States officials were nearing a deal with Mexico to lift existing tariffs in exchange for a flexible import cap. That news triggered intense lobbying by US producers, prompting Commerce Secretary Howard Lutnick and his team to revisit the proposed terms.

Supporters of the quota system argue that it aligns with the Trump administration’s trade objectives: enforcing strict limits on duty-free imports and regulating access to the United States market. Tariff-rate quotas are already used in other United States trade agreements to control the flow of sensitive goods, including sugar and solar panels.

The Trump administration implemented a similar approach in its trade agreement with the United Kingdom, allowing up to 100,000 British vehicles to enter the United States annually with a 10% tariff, well below the standard 27.5% rate. That deal also included TRQs for specific volumes of steel, aluminum, and related goods from the UK.

United States–Iran Conflict Temporarily Delayed Negotiations: Ebrard

According to Mexican Minister of Economy Marcelo Ebrard, military tensions between the United States and Iran temporarily delayed progress in the steel and aluminum negotiations. However, he emphasized that the talks are now nearing completion.

“It has been a complex process negotiating with the United States, even though we are in daily contact with the Department of Commerce and the USTR,” Ebrard stated. “Sometimes meetings get canceled, because of bombs, or Iran-related issues, which causes delays.”

Still, he expressed confidence that the agreement is within reach. “Negotiations work like this. What matters is continuous progress, and we are working on it every day,” he said. “I would not want to set an ultimatum for the other side, because then it is no longer a negotiation. Right now, we are in the final phase.”