How Trump’s Tariffs Will Disrupt Key Industries in Mexico

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 (SE), warned that these taxes would represent an approximate cost of $20.5 billion dollars 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 rates will particularly affect the automotive and electronics sectors. The automotive and electronics industries represent approximately 46 percent of Mexican sales, with a combined value estimated at $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 has argued that this condition has been exploited by China to strengthen its automotive industry. Mexico has become the third-largest exporter of vehicles worldwide. Between 2022 and 2023, its sales grew by 14.33 percent and reached a value of 188.9 million dollars, 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 SE.

Mexico’s National Auto Parts Industry (INA) 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 up to one 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 Leon. 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, 88.8 percent of which were destined for the United States. 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 additional dollars when purchasing new monitors, and around five million families would assume an extra expense of $817 million when purchasing refrigerators.