March 31, 2025
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“I couldn’t care less if they raise prices…” That’s how President Trump waved off concerns about the impact of his sweeping new auto tariffs. The message? Tariffs are coming—negotiations can wait.
As April 2 approaches, the fog is lifting—but the outlook remains volatile. A 25% general tariff on all Mexican imports is confirmed. New sector-specific penalties are expected any day. And while the U.S. has clarified that auto tariffs will only apply to non-American content in vehicles assembled under USMCA, the rules are still evolving, markets remain jittery, and trade partners are walking a fine line.
Mexico’s formal response is scheduled for April 3. Behind the scenes, automakers, retailers, and suppliers are racing to adjust, bracing for ripple effects that could reshape logistics across the continent. In this edition, we trace the full arc: from proclamations and political brinkmanship to market fallout, nearshoring bets, and what lies ahead for the future of North American trade.
The U.S. trade agenda is no longer speculative—it’s taking shape. As of March 27, a 25% general tariff on all Mexican imports is confirmed to begin April 2. In parallel, the U.S. clarified that a matching 25% tariff will apply to imported vehicles, light trucks, and critical components like engines, batteries, and electronics—but only to the portion of value not produced in the U.S., under USMCA rules. This partial exemption offers a buffer for North American supply chains, particularly for Mexican-made vehicles with significant U.S. content.
Secretary Marcelo Ebrard has emphasized this point, stating that most Mexican auto exports meet the thresholds to avoid the full tariff. Still, the market response was immediate: auto stocks fell globally, investment timelines are under review, and manufacturers are recalibrating production and pricing strategies. Trump called out Tesla as a “winner”, but most automakers signaled concern over rising costs and operational uncertainty.
In Mexico, President Sheinbaum’s administration is opting for a strategic pause. Rather than announce countermeasures, she confirmed a national response will be issued April 3—after the U.S. releases final details. Behind the scenes, officials are negotiating targeted carve-outs and maintaining diplomatic dialogue, with an emphasis on protecting employment and preserving nearshoring momentum.
President Trump’s March 27 proclamation confirmed a 25% tariff on imported vehicles—but with a critical nuance: for cars and parts produced in Mexico and Canada under USMCA, only the portion of the value not generated in the U.S. will be taxed. That means vehicles with high U.S. content could see a significantly reduced effective rate—or avoid the tariff altogether. Mexican officials, including Economy Secretary Marcelo Ebrard, argue that most vehicles exported from Mexico already meet this threshold due to deep supply chain integration.
Yet major uncertainties remain. No official guidelines have been issued on how this value will be calculated or verified. As of now, USMCA-qualified auto parts are not subject to the new tariff—but this status could change depending on the April 2 announcement. For automakers, that’s enough to trigger caution: investment decisions are on hold, and procurement strategies are being reexamined as manufacturers wait for the full rulebook to emerge.
The economic outlook for Mexico has darkened significantly under the weight of pending U.S. tariffs. The OECD projects a contraction of -1.3% in 2025, followed by another -0.6% in 2026 if the full tariff package materializes. Meanwhile, Fitch Ratings cut its baseline forecast for Mexico’s GDP growth to 0.0% for 2025, citing industrial weakness, climate-related pressures on the primary sector, and prolonged uncertainty. The agency expects a technical recession, with GDP shrinking in the second and third quarters. Banxico, for its part, has revised its own 2025 projection down to 0.6%, not yet accounting for the impact of tariffs. In contrast, the market consensus gathered by Citi forecasts a slightly more optimistic 0.8% growth rate.
The U.S. isn’t immune. Growth is expected to slow to 2.2% in 2025 and 1.6% in 2026, down from 2.8% in 2024. Trade policy uncertainty, inflationary pressures, and tighter investment climates are beginning to ripple across the continent.
As the spotlight falls on Mexico, the U.S. is facing unintended consequences at home. In February, the U.S. trade deficit widened by 60% year-over-year—one of the sharpest spikes in a decade. The driver? Companies rushing to front-load imports ahead of rising tariffs.
This surge underscores a paradox: rather than correcting imbalances, the new tariffs may be distorting supply chains, raising consumer prices, and fueling inflation. If the trend continues, it could undercut the very goals the policy aims to achieve—namely, stronger domestic manufacturing and trade self-reliance.
Despite prevailing uncertainties, long-term investments in Mexico's automotive industry have demonstrated remarkable resilience. In 2024, the country attracted a record $6.9 billion USD in Foreign Direct Investment (FDI) specifically within the automotive assembly sector. This represents a significant increase from the $5.1 billion USD recorded in 2023. This upward trend underscores the confidence investors have in Mexico's role as a regional manufacturing hub, bolstered by nearshoring strategies and deep integration with the U.S. market.
April 2 isn’t just a deadline—it’s a reset button. The U.S. will impose a 25% tariff on all Mexican imports and outline a broader “reciprocal tariff” plan targeting strategic sectors. But as Trump stated aboard Air Force One, negotiations will come “probably after” the tariffs go live. His message is blunt: “We’ve been taken advantage of for 40 years. It’s time to reset.”
What’s on the table? New auto tariffs are confirmed, pharmaceutical duties are “coming soon,” and sector-by-sector levies may be stacked on top of country-specific ones. As of now, implementation rules are evolving by the day—leaving governments and businesses in reactive mode.
Mexico is playing for long-term stability. President Sheinbaum has promised a “comprehensive response” on April 3 but is actively working behind the scenes to secure exemptions—especially for high-integration sectors like autos. Marcelo Ebrard, Mexico’s economy chief, continues direct talks with U.S. Commerce Secretary Howard Lutnick, aiming to protect nearshoring momentum without escalating the rhetoric.
Meanwhile, Canada and the EU are preparing countermeasures and potential WTO cases. The U.K. has signaled a more measured approach but is watching closely. With geopolitical tensions rising and key allies at risk of being lumped together under new tariff regimes, a central question remains: Will U.S. policy apply pressure equally—or strategically?
While headlines highlight disruption, some analysts offer a more tempered outlook. After Trump’s announcement, the peso briefly fell to 17.15 per dollar, softening the dollar-cost of Mexican goods and helping offset part of the tariff impact. Vehicles that already meet USMCA content thresholds may face far lower effective duties—some estimates suggest as little as 7%, once exchange rates and exemptions are factored in.
President Sheinbaum’s steady approach may help avoid escalation. Her administration continues to prioritize dialogue, job protection, and nearshoring momentum. Meanwhile, influential voices in the U.S. business community—like the U.S. Chamber of Commerce—are sounding alarms about the domestic cost of blanket tariffs. They argue that tariffs risk hurting American manufacturers, consumers, and exporters more than they help, and urge the administration to pursue targeted negotiations instead. And as one analyst framed it: if tariffs do go into effect, they’re likely to be minimal or short-lived—not for Mexico’s sake, but because it’s what ultimately makes sense for the United States.
Walmart has announced a massive $6 billion USD investment in Mexico for 2025, spanning new stores, digital upgrades, and logistics hubs—including a key facility in Silao, Guanajuato. This signals confidence in the country’s consumer strength and strategic role in North American supply chains.
In a time of tariff anxiety, Walmart’s decision underscores a bigger trend: multinationals are still betting on Mexico’s long-term economic potential.
As pressure builds around trade policy, many in the U.S. business community—including the influential U.S. Chamber of Commerce—are voicing a clear concern: broad-based tariffs may do more harm than good. Roughly 56% of all U.S. imports are raw materials, intermediate goods, or capital equipment used by American manufacturers—essential inputs often unavailable domestically at scale or competitive cost. Imposing tariffs on these goods raises production costs and risks making U.S. exports less competitive abroad.
Retaliation is another threat. In the past, foreign governments have responded to U.S. tariffs by targeting American staples—agricultural products, auto parts, machinery—placing more than $3 trillion in U.S. exports at risk. The first to feel the impact are often workers and producers in states with strong manufacturing and farming bases.
Rather than applying one-size-fits-all penalties, the Chamber and other trade experts advocate for enforceable, reciprocal trade agreements. These pacts—especially those based on “zero-for-zero” tariff reciprocity, where all duties are eliminated on both sides—have a proven track record. While countries with U.S. free trade agreements make up just 6% of the world’s non-U.S. population, they purchase nearly 50% of all U.S. exports and tend to see U.S. export growth three times faster than non-FTA countries.
One of the thorniest questions raised by the new auto tariffs is also the simplest: what exactly counts as an import? In today’s automotive industry, a single vehicle often relies on parts from multiple countries—even if it’s assembled in the U.S. A Nissan Rogue built in Tennessee may include a Japanese engine and a Mexican transmission. A Chevy Blazer assembled in Mexico may use mostly U.S.-made parts.
Under the new rules, many of these vehicles will still face tariffs based on final assembly location, not actual content. That raises the risk of penalizing companies that are deeply invested in North American manufacturing. Without a more nuanced approach, these policies could disrupt the very integration that’s made regional production efficient—and competitive.
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