U.S. President Donald Trump announced Wednesday that he would impose a 25% tariff “on all cars that are not made in the United States,” but U.S. content in vehicles assembled in Mexico will be exempt from the duty, lowering the effective tariff on vehicles made in Mexico.
The tariff, which will also apply to certain automobile parts, is scheduled to take effect next Thursday April 3, but it appears that Mexican parts compliant under the United States-Mexico-Canada trade agreement (USMCA) will not immediately be taxed.
Mexico exported some 2.9 million vehicles to the United States last year, and total automotive exports (Mexican-made vehicles and parts) generated revenue of more than US $181 billion.
More than 80% of the vehicles exported from Mexico go to the United States, meaning that the soon-to-be-imposed tariff will have a major impact on the Mexican auto industry, which includes U.S. automakers such as General Motors and Ford as well as other companies that ship vehicles across the border.
In a fact sheet published on Wednesday, the White House noted that President Trump had “signed a proclamation invoking Section 232 of the Trade Expansion Act of 1962 to impose a 25% tariff on imports of automobiles and certain automobile parts, addressing a critical threat to U.S. national security.”
The White House said that “the 25% tariff will be applied to imported passenger vehicles (sedans, SUVs, crossovers, minivans, cargo vans) and light trucks, as well as key automobile parts (engines, transmissions, powertrain parts, and electrical components), with processes to expand tariffs on additional parts if necessary.”
Trump described the tariff as “very modest” and noted that “if parts are made in America and a car isn’t, those parts are not going to be taxed or tariffed.”
“And we’ll have very strong policing as far as that’s concerned,” Trump said.
“For the most part, I think it’s going to lead cars to be made in one location. Right now, a car would be made here, sent to Canada, sent to Mexico, sent all over the place. It’s ridiculous,” he said.
Asked whether there were any conditions under which he would lift the auto tariffs, Trump said they were “permanent.”
President Trump announces 25% tariffs on all cars shipped into the United States that will go into effect April 2. pic.twitter.com/EUmRJ0Hkaa
— CSPAN (@cspan) March 26, 2025
The tariff as it will apply to vehicles made in Mexico
The White House said that “importers of automobiles under the United States-Mexico-Canada Agreement will be given the opportunity to certify their U.S. content, and systems will be implemented such that the 25% tariff will only apply to the value of their non-U.S. content.”
It also said that “USMCA-compliant automobile parts will remain tariff-free until the Secretary of Commerce, in consultation with U.S. Customs and Border Protection (CBP), establishes a process to apply tariffs to their non-U.S. content.”
It was unclear how soon that process would be established.
Guillermo Rosales, president of the Mexican Association of Automotive Distributors (AMDA), said that a vehicle made in Mexico for export to the United States has, on average, 40% U.S. content. The effective tariff on a vehicle assembled in Mexico with 40% U.S. content would be 15%.
Given the effective tariff rate on Mexican-made cars will be lower than the full 25%, Mexico will have a “competitive advantage” over other countries and trading blocs, the Milenio newspaper reported.
Ebrard: ‘We have to seek preferential treatment for Mexico’
After highlighting that Mexico exports almost 3 million vehicles annually to the United States and supplies 40% of all parts used in auto plants in the U.S., Economy Minister Marcelo Ebrard told President Claudia Sheinbaum’s Thursday morning press conference that the Mexican government will seek to negotiate a better outcome for Mexico.
“If they’re going to change the system, if we’re going to go to a system of such high tariffs, what we have to do is seek preferential treatment for Mexico so that we have the conditions to protect jobs and the economic activity of Mexico,” he said.
For her part, Sheinbaum said that the government will provide “a comprehensive response on what Mexico will do in the face of this situation” on April 3.
The United States has already imposed 25% tariffs on Mexican steel and aluminium as well as goods from Mexico not covered by the USMCA. The U.S. also intends to impose reciprocal tariffs on goods from all its trading partners on April 2.
“We don’t want to give a response to each issue, but rather a comprehensive response,” Sheinbaum said.
She pledged to “protect Mexico, the jobs that are created here and Mexican companies.”
The end of the USMCA?
Rosales, the AMDA chief, highlighted that Trump’s new auto tariff violates the terms of the USMCA, which superseded NAFTA in 2020.
As things stand, vehicles made in Mexico can enter the United States tariff-free under the USMCA provided that they have North American content of at least 75%.
“Trump is changing from a rule of regional integration to a rule of national origin,” said Ildefonso Guajardo, a federal deputy who served as economy minister between 2012 and 2018 and thus headed up Mexico’s USMCA negotiation team during the presidency of Enrique Peña Nieto.
“… It’s a flagrant violation [of the USMCA],” Guajardo said.
For his part, the Latin America director of automotive consultancy Urban Science, Eric Ramírez, said that the new tariff appeared to represent “the end of the USMCA and three decades of integration” between the auto sectors of Mexico, the United States and and Canada.
Ramírez also said that it will be “very complex” to determine what is U.S. content and what is North American content as “there are systems that are completed between the three countries and which cross the border several times” during production.
The White House said that “legislation, pre-existing trade agreements like the USMCA, revisions to the U.S.-Korea Free Trade Agreement, and subsequent negotiations have not sufficiently mitigated the threat to national security posed by imports of automobiles and certain automobile parts.”
“These new tariffs aim to ensure the U.S. can sustain its domestic industrial base and meet national security needs,” it added.
The tariff ‘doesn’t make any economic sense’
Trump said Wednesday that his signing of an executive order to implement the new tariff marked “the beginning of Liberation Day in America.”
“We’re going to take back just some of the money that has been taken from us by people sitting behind this desk … and we’re going to charge countries for doing business in our country and taking our jobs, taking our wealth, taking a lot of things that they’ve been taking over the years,” he said.
Mexico had a record-high surplus of US $137.8 billion on automotive trade with the United States last year, according to the U.S. Department of Commerce.
Mexico is the top exporter of vehicles to the United States, ahead of South Korea, Japan, Canada and Germany. According to the White House, “in 2024, Americans bought approximately 16 million cars, SUVs, and light trucks, and 50% of these vehicles were imports.”
Citing data from Capital Economics, The New York Times reported that Mexico’s automotive manufacturing sector accounts for about 5% of the country’s economic activity and employs around 1 million people. Auto manufacturing in Mexico is largely concentrated in the north of the country and the Bajío, meaning that states in those regions face the biggest impact from the new tariff.
Citing Cox Automotive, the Times said that “tariffs would add $6,000 on average to the prices of cars made in Mexico or Canada, a category that includes vehicles like the Toyota Tacoma pickup, gasoline and electric versions of the Chevrolet Equinox, and several models of Ram pickups.”
Óscar Silva, who leads consulting firm Roland Berger’s industrial and automotive practices in Mexico, said that the new tariff “doesn’t make any economic sense” and will end up harming the economies of both Mexico and the United States.
An economic windfall for the United States?
Trump said that the duty will generate hundreds of billions of dollars of revenue for the United States in a short period of time, although the aide who handed him the executive order said more specifically, “We expect that these tariffs will result in over $100 billion of new annual revenue.”
“Anywhere from $600 billion to $1 trillion will be taken in over the relatively short-term period, meaning a year from now,” Trump said. “But starting right away — starting right away — I think we’ll go from $600 [billion] to a trillion within two years.”
So-called “importers of record” will pay the tariff to the United States government.
The New York Times reported that “importers of record [in the United States] can be of any nationality … but Richard Mojica, a customs lawyer at Miller & Chevalier, said that importers of record are typically owners or purchasers of goods, and are ‘usually U.S. companies.'”
“Many U.S. companies have expressed frustration with Mr. Trump’s frequent assertions that foreign countries pay for tariffs, saying they are paying those taxes themselves,” the Times added.
Trump also said Wednesday that the new tariff will encourage automakers and their suppliers to open new plants in the United States.
“A lot of foreign car companies, a lot of companies are going to be in great shape because they’ve already built their plant. But their plants are underutilized, so they’ll be able to expand them inexpensively and quickly. But others will come into our country and build and they’re already looking for sites,” he said.
With reports from Milenio, El País, El Economista, Reforma, El Financiero and The New York Times
