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Tariffs

Mexico's Auto Industry Warns of "Disastrous" Tariff Uncertainty Amid US Auto Tariff Dispute

Strategic Insights

— 1 min read

Mexico's automotive sector has been paralyzed by the US's 25% tariff on vehicles, leading the head of the Mexican Auto Industry Association to warn of a "disastrous" situation that could be felt by American and Canadian carmakers as well. The industry is pushing for a separate bridge deal ahead of the USMCA review next year, as growth in production and exports stagnate.

Key Takeaways:

  • Mexico's auto industry is being severely impacted by the US's 25% tariff on vehicles, with finished automobiles still incurring a 25% tariff under separate measures put in place by Trump.
  • The industry is pushing for a separate bridge deal ahead of the USMCA review next year, as growth in production and exports stagnate.
  • Only two or three models made in Mexico have qualified for a discount on the tariff, with the process to apply for exemptions being "too complicated".
  • Mexican carmakers are still paying the 25% rate, and no one has seen their money back yet, according to Rogelio Garza, president of the Mexican Auto Industry Association.
  • Companies such as General Motors and Stellantis have seen their profits hit due to the tariffs, with prices in the US expected to rise soon.
  • Garza expects the US to continue with protectionist policies, citing the recent deal with the EU and the rise of protectionism as the norm.
  • Mexico's car industry has flatlined amid the tariff uncertainty and sharp government budget cuts, with the sector experiencing a sharp decline in production and exports.

Statistics:

  • Production of finished automobiles in Mexico was flat at 2mn vehicles in the first half of the year.
  • Exports of vehicles rose 2.8% to 1.7mn in the first half of the year.
  • The program to claim a discount on the tariff for US content has seen only 2 or 3 models qualify for the discount.
  • The cost of shifting production to the US would be too high for Mexican carmakers.
  • The Mexican car industry employs more than 1 million people.
  • Mexico's car industry is the world's fifth-largest, leapfrogging Germany and South Korea last year.

Sources:

  • Rogelio Garza, president of the Mexican Auto Industry Association, speaking in an interview with Reuters. (Henry Romero/Reuters)
  • News Article: "Mexico's auto industry warns of 'disastrous' tariff uncertainty amid US auto tariff dispute" by Christine Murray, Reuters, August 2023.

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