US Proposes 10% Tariff on Mexico Over Forced Labor Gaps

The US Trade Representative proposed a 10% additional tariff on Mexican imports under Section 301 of the Trade Act, citing insufficient enforcement of forced labor prohibitions on goods from third countries, not Mexico's own production. The measure, part of a broader investigation covering 60 economies, threatens to impose permanent sector-specific duties that would undermine USMCA duty-free protections at a critical moment in bilateral negotiations, with Mexico's USMCA utilization rate having surged to 88.7% in 2025. Export-oriented industries, particularly automotive, maquiladora operators, and textile manufacturers, face the greatest exposure alongside broader investment confidence risks tied to the treaty's July 1, 2026 decision point.

The US Trade Representative proposed a 10% additional tariff on imports from Mexico on June 2, citing the country's failure to effectively enforce a prohibition on goods produced with forced labor in third countries, adding a new layer of trade pressure as bilateral USMCA negotiations advance.

The proposal stems from a Section 301 investigation initiated by USTR on March 12, 2026, targeting 60 economies that collectively represent more than 99% of US imports in 2024. Mexico is among six economies, alongside Canada, Ecuador, the European Union, Indonesia and Pakistan, that USTR determined have failed to effectively enforce a forced labor import prohibition, despite having partial measures in place.

The 10% rate would apply to Mexico and 13 other economies. The remaining 46 countries included in the investigation would face a higher rate of 12.5%. USTR also proposed a textile mechanism that would allow a set volume of apparel and textile imports from certain countries to enter the United States at a reduced Section 301 tariff rate. The investigation included nearly 60 testimonies and approximately 500 public comments before USTR issued its findings.

The USTR's findings do not accuse Mexico of using forced labor in its own production processes. The argument focuses on the absence of effective mechanisms to block the entry of goods manufactured under those conditions in third countries,  a situation the Trump administration frames as generating unfair commercial distortions for US businesses.

USTR Jamieson Greer said it was unacceptable for major US trading partners to lack rigorous controls against imports linked to forced labor, arguing the situation creates unequal competitive conditions. Greer acknowledged progress in some countries, including commitments made under USMCA, but said he expects additional action to ensure international trade does not incentivize or sustain forced labor practices.

The push for Section 301 investigations gained momentum following a legal shift earlier in 2026. On Feb. 20, the Supreme Court ruled that the International Emergency Economic Powers Act does not authorize the president to unilaterally impose tariffs, invalidating tariffs previously introduced under that authority. With IEEPA struck down, the administration turned to Section 301 as a more durable legal vehicle to impose trade restrictions. Mexico's position in the broader USMCA review subsequently strengthened following that ruling, as the judicial boundary reduced the risk of unilateral trade measures disrupting deeply integrated North American supply chains.

The timing compounds existing bilateral tensions. Bilateral trade between Mexico and the United States grew 6.8% to US$147.3 billion in the first two months of 2026, as Mexico's share of total US imports rose from 13.8% to 16.9%. Mexico has remained the United States' largest trading partner since overtaking China in 2023, and USMCA utilization rates jumped from 44.8% to 88.7% in 2025 as companies restructured supply chains to qualify for preferential market access, a trend that a forced labor tariff finding could directly undermine.

Mexico's Ministry of Economy characterized the announcement as a preliminary stage and said the process allows for comments, consultations and discussions over the next 45 days. The ministry also noted that the investigation is part of a broader Washington effort to replace tariffs previously applied through IEEPA and Section 122 of the US Trade Act.

"The Mexican government will continue to present arguments against the assumptions put forward to avoid the application of tariffs for these reasons," the Ministry of Economy said.

Mexico's private sector has also pushed back. The Business Coordinating Council (CCE), the Confederation of Mexican Chambers of Industry (CONCAMIN) and the National Council of the Maquiladora and Export Manufacturing Industry (INDEX) formally contested the application of Section 301 tariffs, delivering a document directly to USTR Greer requesting full exclusion from the investigation. The coalition argued that no evidence of overproduction of Mexican goods exists and warned that an adverse finding could impose permanent, sector-specific tariffs that undermine USMCA duty-free protections and destabilize deeply integrated North American supply chains.

The forced labor probe runs parallel to a separate Section 301 investigation into structural manufacturing overcapacity targeting 16 economies including Mexico and China. Mexico separately requested removal from that investigation as well. "There is neither a legal nor a factual basis to include Mexico within the scope of this investigation," the Ministry of Economy stated in a written communication to the USTR.

Since USMCA entered into force, Canada and Mexico have invested US$775 billion in the United States and two-way trade has grown 50%, totaling US$1.9 trillion in goods and services, figures the US private sector has cited in urging USTR to preserve the agreement's tariff exemptions intact.

For Mexico, an adverse finding in either investigation could translate into permanent, sector-specific tariffs that challenge the duty-free protections established under USMCA, compounding the trade uncertainty the country is already navigating ahead of the treaty's July 1, 2026 decision point. Public hearings on the proposed forced labor tariff actions are scheduled for July 7, 2026, with written comments accepted through July 6 and requests to appear due by June 22.