The US government has imposed tariffs of 25 percent on all imports from Mexico and Canada. The measure promoted by Donald Trump threatens the free-trade system that the three countries have maintained for more than 30 years.
Even before the confirmation that the tariffs went into effect on March 4, Marcelo Ebrard, head of the Mexican Ministry of Economy, warned that these taxes would represent an approximate cost of $20.5 billion for about 89 million American families. He also warned of the possible inflationary impact on products such as computers, televisions, refrigerators, agricultural goods, auto parts, and vehicles.
Mexico is a key trading partner for the United States. Between January and November 2024, Mexican exports totaled $466.6 billion, while American exports reached $309.4 billion.
In Mexico, these tariffs will particularly affect the automotive and electronics industries, which represent approximately 46 percent of Mexican exports, with a combined value of around $200 billion.
The Automotive Industry Is at Risk
The automotive industry has shown significant regional integration under the United States-Mexico-Canada Agreement (USMCA). This agreement allows foreign companies that produce in Mexico or Canada and use locally sourced materials to export their products to the United States at low tax rates.
The Trump administration argues that this condition has been exploited by China to benefit its auto industry. Mexico has become the third-largest exporter of vehicles worldwide. Between 2022 and 2023, its sales grew by 14.3 percent and reached a value of $188.9 million, according to the World Trade Organization. Most of these units are shipped to the United States, although the origin of many can be traced back to China, which has established itself as Mexico’s main auto supplier, with exports reaching $4.6 billion in 2023, according to the Ministry of Economy.
Mexico’s National Auto Parts Industry has warned that the imposition of tariffs on Mexican imports will weaken trade, reduce competitiveness in the region, and affect economic stability. In a statement, it stressed that the automotive and auto parts sector is a pillar of North American exports, with the capacity to generate more than 11 million jobs in the USMCA countries. The association foresees that assemblers in Mexico could reduce production by as much as 1 million units this year due to the new taxes, which would affect product availability, job creation, and the supply chain.
The main states producing automotive parts in Mexico are Mexico City, Chihuahua, and Nuevo León. Experts say that the most affected companies would be assemblers of US, Japanese, and European origin. Ebrard has estimated that the new tax burden would affect 12 million households in the United States, with an increase in spending of up to $10.4 billion in this area. As an example, he pointed out that 88 percent of the pickups sold in the United States come from Mexico and are assembled by companies such as General Motors, Ford, and Stellantis.
The minister of economy emphasized that the tariffs would represent the United States shooting itself in the foot, as it would directly impact its own automotive companies, which depend on Mexican production to supply their domestic market.
Electronics Prices on the Rise
The electronics and appliance sector will also be affected. In November 2024, Mexican exports of electrical and electronic equipment reached $8.9 billion, 89 percent of which was destined for the US. The production of these devices is concentrated in Baja California, Chihuahua, and Nuevo León, where thousands of jobs and assembly plants could be at risk.
Trump’s tariffs will have significant implications for US consumers. An SEC study estimates that the additional levy would cost an extra $7.1 billion for 40 million families purchasing computers. Likewise, it is expected that around 32 million households would pay up to $2.4 million more when purchasing new monitors, and around 5 million families would assume an extra expense of $817 million when purchasing refrigerators.
Economic analyst Roberto Aguilar told WIRED that Mexico will be the main loser, since the US strategy seeks to strengthen its local production. “The nearshoring is on hold and will wait until certainty returns, both externally and internally. A recession in the Mexican economy is highly probable, since, beyond the trade threat, the country began a downward trend last year due to the lack of certainty and investment,” he says.
An analysis by the US Congress warns that the unilateral imposition of these tariffs could violate the USMCA agreement, which would unleash a trade war with serious economic consequences for the countries involved. “The tariffs would be a violation of the USMCA, which would allow Mexico to file a trade dispute. This could affect US exports valued at billions of dollars,” the report states.
Ana Gutiérrez, coordinator of foreign trade and labor markets at the Mexican Institute for Competitiveness, told WIRED that the Trump administration’s decisions “go against the USMCA. It transgresses the provisions of the agreement and could lead to a dispute settlement case. The issue of how Trump is using tariff threats should be reviewed.”
The impact will not only be seen in domestic spending, says Gutiérrez. “The US market buys many raw materials from Mexico. A product that is produced in the United States and that would not be affected by the tariffs directly, will see changes in its production price due to the cost increase in the supply chain.” She adds that Trump’s tariff measures “jeopardize the production chain in North America, one of the most integrated at a global level. They threaten jobs and make us less efficient and resilient to compete with other economies, such as China.”
A Violation of the USMCA
Monica Lugo, director of institutional relations at Prodensa and former negotiator of the USMCA and other free-trade agreements, emphasizes that “the imposition of 25 percent tariffs is a flagrant violation of the trade agreement between the three countries. The Trump administration is not considering what the country agreed to with Mexico and Canada. The United States wants to wrongly justify it as a national security issue.”
Claudia Sheinbaum, Mexico’s president, reiterated in her morning conference on Monday that her government maintains communication with the US administration to address trade and security issues. She called for calm and assured that Mexico is prepared to respond to any measure taken by its main trading partner. “We have been in contact, we have established the necessary agreements and coordination, but the final decision depends on the US government,” she said. “Whatever the outcome, we will also take the corresponding measures.”
Aguilar suggests that Mexico could respond with selective tariffs aimed at key US states with a strong commercial relationship with Mexican suppliers, seeking to minimize the inflationary impact. “It is better to reach agreements before entering into a trade war. Mexican authorities should negotiate and address Trump’s real concerns, such as fentanyl trafficking and migration, with permanent measures and not just temporary actions,” he says. “It would also be necessary to reverse legislative changes that generate uncertainty and distrust in investors.”
The Real Winner Is China
Lugo says the real problem is that the US measures “generate a lack of productivity. The United States has changed policy without a transition period. It will continue importing at a 25 percent higher cost, and this will generate a vicious circle with job and productivity losses. If these tariffs last more than a month, they could have a catastrophic effect on Mexico’s economy.”
The specialist anticipates that, despite the wishes of the Trump administration, the Chinese economy will benefit the most. “China is savoring everything that is happening with the United States and its main trading partners,” she says. “The loss of employment, productivity, and above all competitiveness at an international level favors the Asian country, unfortunately, in the medium and short term.”
This story was originally published on WIRED en Español and has been translated from Spanish.