U.S. Refines Auto Tariff Strategy to Ease Trade Pressures
On April 29, 2025, the U.S. administration introduced two executive actions to refine its auto tariff strategy, initially launched on February 1 under Section 232 of the Trade Expansion Act, which imposed 25% tariffs on automobiles and key parts to protect national security. These new measures aim to support domestic automakers while curbing excessive import costs. The first action refines earlier tariffs by maintaining the 25% rate but introduces offsets for vehicles assembled in the U.S., reducing effective tariffs based on domestic content. This aims to promote U.S. assembly and reduce dependence on foreign parts. The second action tackles “tariff stacking” by ensuring only the highest applicable tariff applies to an imported item, retroactively from March 4, 2025, with refunds issued for overpaid duties on goods like steel, aluminum, and cars.
These changes intend to balance national security with economic feasibility by mitigating production cost inflation and potential consumer price hikes. However, analysts caution that high U.S. part costs may still drive vehicle prices upward. There are concerns about trade tensions with major partners like Canada, Mexico, and China, and possible retaliation could disrupt global trade. Nevertheless, Marcelo Ebrard, Secretary of Economy, celebrated the fact that Mexico and Canada will not pay tariffs on auto parts as an important step forward. Everything covered by the USMCA is exempt from tariffs, except for steel and aluminum, which are applicable to all countries. Meanwhile, for vehicles and auto parts, special treatment will be given to products produced within the USMCA, such as auto parts.
AGREEMENT IS REACHED OVER WATER DISPUTE
Mexico and the United States reached an agreement under the 1944 Water Treaty to address Mexico’s water delivery obligations from the Río Bravo during the current five-year cycle, ending October 24, 2025. Mexico committed to immediate and rainy-season water transfers to help compensate for a potential shortfall. The deal aims to ensure water supply for Mexican communities and U.S. agricultural needs. Both countries agreed the treaty remains beneficial and doesn’t require renegotiation. The agreement was formalized through technical meetings and will be monitored by the International Boundary and Water Commission (IBWC) and Mexico’s National Water Commission (CONAGUA).
Executive Order Gradually Reduces Labor Week in Mexico
Yesterday, as part of the Labour Day celebrations (International Workers' Day), the Mexican Secretary of Labor announced that, over a period of five weeks (starting June 2, 2025), a national process of social dialogue involving workers, unions, and employers’ representatives will take place to discuss the gradual reduction of work hours in Mexico—from the current maximum of 48 hours per week to a maximum of 40 hours per week.
It is expected that after the national social dialogue, President Sheinbaum will prepare and send to Congress the legislative bill for the work hours reduction. Congress will wait until the head of the Executive sends the bill before beginning discussions. As Congress will not resume regular sessions until September 2025, and since the President is expected to send the bill no earlier than mid-July, it is anticipated that formal approval will happen in October 2025 at the earliest.
Please note that the reduction of work hours will be gradual, with the official goal of reaching a maximum of 40 hours per week by January 2030.
The specific implementation timeline for the reduction (e.g., maximum 46 hours in 2026, maximum 44 hours in 2027, etc.) will not be known before mid-July 2025. It is likely that different scenarios will be presented during the social dialogue, but the official plan for the gradual reduction will only be confirmed when the President submits the bill.
