The tariff wall that Mexico has deployed against countries with which Mexico does not have a trade agreement will pose a greater challenge for the country’s auto sector. The Mexican Congress this week approved a 20 to 50 percent increase on vehicles from countries like China, India, Vietnam, South Korea, among others. Added to this is an increase in rates of 141 tariff fractions of up to 15 to 25% on automobile parts from January next year. The automotive sector will be, along with the textile, clothing and steel sectors, one of the sectors that will have the greatest impact on the costs of its imports from next year. Experts say the move will make car models imported from China more expensive and will put pressure on auto parts importers and automakers in Asia, forcing them to rethink their prices and costs. Despite the risks of price increases in its production process due to this tariff increase, Claudia Sheinbaum’s government has argued that the measure is necessary to protect local producers and jobs.
This change of direction has already raised alarms in China and South Korea, two of the countries most affected by the increase in customs tariffs. The Asian giant has asked Mexico to “correct” the imposition of customs duties that it considers unilateral and protectionist. While South Korea limited itself to stating that it would evaluate the measures taken by the Latin American country moving forward. Following these statements, the Secretary of Economy of Mexico, Marcelo Ebrard, assured that he would continue the dialogue with these nations, but he explained that this was not a measure aimed at a single country, but rather actions aimed at protecting sectors in Mexico. “Bringing in imported motor vehicles leaves us nothing, it leaves us nothing, you are dismantling our auto industry, which represents 1.3 million jobs in Mexico that need to be protected,” he said after participating in an event this Thursday.
The Mexican Automobile Industry Association (AMIA) supported Claudia Sheinbaum’s government’s increase in tariffs, describing it as a “key tool” to strengthen national production and avoid market distortions through conditions of effective competition. The union, which brings together around thirty manufacturers in the country and the main export force to the United States, stressed that it would seek actions to strengthen the automobile industry based in the country. In 2024, automotive exports to the United States will total more than $182 billion. Despite this leadership, the Trump administration applied a tariff of less than 25%, proportional to the American content of each unit.
For Guillermo Rosales, president of the Mexican Association of Automotive Distributors (AMDA), an increase in costs in the industry, and more specifically in Chinese assembly companies, will be inevitable due to this increase in customs duties on vehicles and automobile parts. “Vehicles that are not produced in Mexico will have to pay 50%; this will have an impact on the price of automobiles, mainly Chinese brands. The impact will not be homogeneous, we will have to see the adjustment capacity of each manufacturer,” he indicates. The head of AMDA hopes that the Ministry of Economy will support the industry with sectoral programs, in order to improve the conditions for foreign procurement of those supplies that are not available on the market.
Although the Mexican government assures that the increase in customs duties responds to a global need, specialists warn that it is a gesture in favor of the protectionist policy of the United States and commercial integration in North America, a topical issue several months before the start of the review during which the validity of the USMCA will be defined. “Wherever we look, the auto industry will be affected. Cars will become more expensive not only among Chinese automakers, but also among other automakers that use Asian auto parts. The countries that will have to worry are China, South Korea and India; on the contrary, Japan, by having a trade agreement with Mexico, could benefit,” says Adolfo Laborde, international trade expert at CIDE.
Eric Ramírez, director of the consulting company Urban Science, explains that of the total number of cars imported so far this year, around 887,000 units, 54% of which come from countries with which Mexico does not have a trade agreement, which equates to just over 467,000 vehicles. “In the case of Chinese brands, the final impact of the price increase will reach 27% due to the cost structure. In addition, most of the impact can be absorbed between the brand and the distributors, to only increase prices by 5% for the end customer,” he envisages.
The wave of reactions to this increase in customs duties demonstrates the importance of the Mexican automobile market to the world. From January to November of this year alone, more than 271,000 vehicles sold in Mexico came from China, representing 20% of the market. This participation includes both Chinese brand cars and vehicles manufactured in China by big players such as General Motors, Renault, among others. According to official figures, in 2024, Chinese car shipments to Mexico totaled more than $13.490 million, second only to the United States’ $25.685 million. In third place was Germany with $4 billion, and in fourth and fifth place were India and South Korea. These last two countries, not having a trade agreement with Mexico, will suffer from the increase in customs duties.
On the streets of Mexico, it is increasingly common to see the names MG Motor, Changan, BYD or JAC on cars. The marketing of Chinese cars in Mexico has been gaining ground in recent years. In a decade, the Asian giant has supplanted Japan and become Mexico’s second-largest vehicle importing partner, growing from $2 billion in vehicle imports in 2014 to more than $13 billion in 2024. Along with imports, automakers like BYD have carried out manufacturing projects from Mexico to serve the growing Mexican market. But faced with the new global pricing policy, these projects are now on hold.
Mexico is the leading exporter of automobiles to the United States. In 2024, this Latin American country will ship 2.9 million finished vehicles, worth $78.5 billion. If auto parts and engines are added, the foreign exchange amounts to more than $182 billion, according to figures from the US Department of Commerce. With this new internal cost structure, Mexico will have to readjust its supply chain and rethink its domestic market, which so far this year has more than 1.3 million vehicles.
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