The deeply integrated U.S.–Mexico automotive corridor, vital to regional manufacturers, faces renewed pressures today. Steel, auto, and security-linked tariffs—rooted in Section 232 and IEEPA—are systematically reshaping cost structures, trade flows, investments and North American manufacturing strategy.
Mexico manufacturers and automakers now navigate three overlapping tariff regimes:
Effective June 4, 2025, the Section 232 tariff on metal content doubled to 50%, applying across almost all steel and aluminum imports—including those from Mexico. Only the U.K. retains a 25% rate. Metal-content valuation remains strictly based on material weight and composition.
Implemented on April 2/May 3 (2025), these Section 232 tariffs impose:
However, vehicles and parts meeting USMCA rules are either exempted or only taxed on their non-North American content. Current practices indicate 92% of Mexican manufactured parts qualify under USMCA.
Initiated on March 4, 2025, these tariffs aim to deter illicit drug flows like fentanyl and illicit migration. Though covering ~30% of Mexican exports, they do not stack with Section 232; only the highest applicable rate applies. Their legality remains pending judicial review.
On April 29th, an executive order eliminated the compounding of tariffs—auto and auto parts tariffs no longer stack with steel/aluminum duties or border security IEEPA tariffs.
Simultaneously, U.S. automakers assembling vehicles within the United States will receive:
Tariffs on non-U.S. automotive content are deliberately engineered to recalibrate supply chains and penalize vehicles that technically meet USMCA, but fail to maximize U.S.-based content. The U.S. has introduced tariffs on 25% on non-U.S. value even with compliance USMCA vehicles--transforming tariff policy into a lever for deeper domestic supply reshaping.
Industry metrics reveal the tangible strain of tariffs on the Mexico manufacturing landscape:
These figures reflect not only softening demand but also increasing compliance and cost pressures stemming directly from U.S. tariff policy, raw material inflation, and cross-border procedural changes. Source: ANAPS Automotive Report June 2025
Insights from Prodensa's Institutional Relations team:
The tariffs on automobiles and auto parts, implemented by President Trump, are grounded in a strategic effort to protect national security and revitalize the U.S. auto industry. By invoking Section 232 of the Trade Expansion Act of 1962, the administration has justified these measures as a response to the perceived threat posed by excessive imports to the domestic industrial base and supply chains.
The policy emphasizes that a strong auto industry is vital for national security, ensuring the U.S. can independently produce vehicles and components critical for military and civilian applications. This includes maintaining the capability to manufacture vehicles for defense purposes, reducing dependence on foreign suppliers, particularly from nations like China.
The tariffs, set at 25% on imported passenger vehicles and key auto parts like engines and transmissions, align with the broader "America First" trade agenda, which prioritizes reducing trade deficits and protecting American manufacturing jobs from foreign competition. Additionally, the tariffs aim to counter trade practices deemed harmful to U.S. economic interests, reinforcing domestic production capabilities.
Original Equipment Manufacturers have adopted varied strategies to mitigate the impact of these tariffs.
The tariffs present significant challenges for OEMs operating in Mexico, including complex USMCA compliance requirements, such as ensuring 75% regional vehicle content and 40% core parts sourcing, which vary by automaker and model.
Non-compliance risks, penalties, and the inability to access U.S. tax credits create an incentive imbalance for Mexican exporters. Trade uncertainty and erratic tariff policies have placed OEMs in a planning gridlock, with potential production drops of up to 20,000 units per day according to S&P Ratings.
Relocating production to the U.S. is challenging due to higher labor costs and shortages, leaving underutilized plants in Mexico. Despite these hurdles, contract manufacturing in mexico remains a strategic hub for OEMs due to its proximity to the U.S., the world’s largest automotive market, reducing transportation costs and delivery times.
Mexico’s skilled workforce and favorable business environment, supported by over 14 trade agreements, including the USMCA, enhance its competitiveness. As the fourth-largest vehicle exporter and autoparts producer globally, Mexico produced 3.9 million vehicles in 2024, with a forecasted 2.7% growth in 2025.
By enhancing origin documentation and engaging in USMCA dialogues, OEMs can leverage maquiladoras in Mexico and established supply chains to offset tariff impacts and maintain a competitive edge in North America.
This wave of tariff measures reveals a targeted U.S. strategy—not just protectionist, but precise in market behavior and sourcing patterns. By distinguishing North American content from the periphery, the U.S. is seeking to reward localized production while safeguarding against global rerouting of critical parts. As a result, identity and traceability are now as valuable as economic scale.
For Mexican automotive stakeholders, navigating this policy labyrinth demands three strategic pillars:
At Prodensa, we are actively supporting clients in navigating these new operational, compliance, and policy landscapes. The key to resilience lies in proactive adaptation, not reacting to tariffs after the fact but positioning for competitiveness regardless of where the next border line falls.
Schedule a consultation with our experts to discuss how your company can strategically respond to these tariff shifts and protect your competitive edge.