The automotive sector in Mexico and the United States has breathed a sigh of relief at the postponement of the proposed 25% tariffs by President Donald Trump, which are now postponed until April 2. This sector is the main export engine of the Mexican economy and represents the largest bilateral integration between the two countries.
In Mexico, the automotive industry is the leading manufacturing branch for export, with the main destination being the United States, which has positioned the country as one of the four largest vehicle manufacturers in the world in recent years. Mexican automotive exports reached $193.907 billion at the close of 2024, contributing significantly to the manufacturing GDP and the national GDP.
The supply chain in the automotive sector between Mexico and the United States is deeply integrated, where approximately 74% of the direct and indirect inputs used in the manufacturing of vehicles in Mexico come from the U.S. This close relationship is reflected in that 80% of light vehicles exported from Mexico have the United States as their final destination.
Data from the Mexican Association of the Automotive Industry indicate that automotive trade represents around 22% of all trade under the Mexico-United States-Canada Agreement (USMCA). Additionally, Foreign Direct Investment in auto parts in Mexico has grown, thanks to the USMCA, recording $2.3 billion in the third quarter of 2024, which represents an annual increase of 18%.
The interdependence between the automotive sectors of both countries is crucial, as many of the parts used in vehicle assembly cross the border multiple times before finalization. A 25% tariff would significantly raise the average price of cars in the U.S., which could negatively impact the automotive industry in both countries, leading to the need for new plants and large investments.
