Economics: Current US tariff schedule significantly impacts Mexican exports and the broader economy

MEXICO - Report 15 Apr 2025 by Mauricio González and Francisco González

President Trump’s recent announcement of a 90 day pause on his “reciprocal” tariffs left many countries with a 10% across-the-board rate for that period. Mexico was not included in the list of reciprocal tariffs, a development celebrated by Mexican authorities as an achievement. However, there are several factors in the tariff structure currently imposed by the US that imply a greater effect on Mexico than on most countries, given that it leaves in place a 25% tariff on automotive sector components not produced in the US, a rate similar to Washington’s steel and aluminum classifications, as well as on Mexican products that do not enter under the rules of the USMCA. Under this scheme, close to 70% of Mexican exports to the US in 2024 would have faced such tariffs. Although the structure of the tariffs currently in effect could change, heightened uncertainty and, above all, the fact that President Trump has stated that one of his objectives is to relocate the automotive sector to the US, constitute major disincentives to invest in the sector in Mexico and incentives to scale back production, at least for the coming months. These will have negative repercussions on the Mexican economy as a whole.

In this past week’s indicators, industrial production enjoyed a seasonally adjusted expansion in February, although not enough of one to keep the cumulative results so far this year out of the red. February's recovery will prove difficult to sustain in the coming months, given the prevailing environment of internal and external uncertainty for both productive activities and consumption. Last week, it was also reported that consumer inflation in March increased slightly as the non-core component continued to climb. Core inflation was just a basis point shy of February’s level and the sixth time in as many months without this component's experiencing any increase since its October 2024 peak.

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