Global Trade
December 16, 2025
Mexico's tariffs on China: Important move ahead of USMCA Talks
Written by Greg Wittbecker
Mexico has been criticized for its compliance with the conditions of the US-Mexico-Canada Agreement. Amongst the concerns:
- A lack of transparency in its trade statistics. Despite multiple assurances by Mexican officials that accurate, timely publication of its import and export data would be forthcoming, nothing has executed. This is a governmental problem.
- A lack of compliance with USMCA rules of origin for automotive goods. USMCA stipulates 75% of the auto trade must be of North American origin for steel and aluminum. This is a combined government and industry problem. US Customs and Border Protection (CBP) has done a poor job of auditing declarations by Mexican OEM. Those OEM have also not been forthright in making declarations. Anecdotal evidence suggests some of the auto trade does not comply with the rules.
- Inconsistent application of import duties. Mexico has on again/off again tariffs on aluminum. In April 2024, Mexico announced 35% duties on aluminum. On May 9, 2024, it revoked the duties, indicating there was insufficient domestic production and supply to provide for the local markets. This leaves Mexico as a duty unpaid market for primary aluminum and OEMs are taking advantage.
- A conduit for circumvention for trade goods from China and Russia. This has been a recurring theme, with complaints that Chinese aluminum and steel have found its way into Mexico manufactured goods and been exported to the US. This concern is directly tied to USMCA compliance.
These concerns are compounded by the pending application of IEEPA (International Emergency Economic Powers Act) reciprocal tariffs that may be applied to Mexico. Under IEEPA, the Trump administration has imposed 25% duties on Mexican trade non-compliant with USMCA. IEEPA has been ruled illegal by the US Court of Appeals and is now being heard in front of the US Supreme Court. However, the tariffs are still collected on goods deemed not in compliance.
Stakes in US-Mexico trade are big
According to the US Trade Representative, Mexican trade with the US comprised $935.1 billion in 2024, up 5.5% from 2023. The trade deficit with Mexico was $171.5 billion, representing a 14.9% increase over 2023.
So far in 2025, Mexico continues to run a large trade surplus with the US. The US Census Bureau found through September, Mexico’s trade surplus of $145.9 billion trailed only China at $160.5 billion. Annualized, the year-to-date pace has Mexico on course to generate a $193.3 billion surplus.
The Trump administration has aspired to cut trade deficits with all US trading partners and the surpluses with Mexico are undoubtedly a source of irritation.
However, like China, finding a means to rebalance trade has not been easy. US supply chains have been interwoven with Mexico for a long time across multiple industries. Vehicles, electronics, appliances, medical devices, and plastics are amongst the leaders.
The US is also heavily dependent on Mexico for its winter fruits and vegetables. Modelo Especial is the leading beer in the US and tequila/mezcal are the top selling distilled spirits.
Mexico is not ignoring the concerns
President Claudia Sheinbaum has met with President Trump numerous times, and unlike Canada, still is actively engaged in getting a bilateral trade deal done. Trump also is eager to reopen talks on a revised USMCA deal before the middle of 2026.
In this respect, an important legislative act went down in Mexico on Dec. 10, when Mexico’s Congress authorized up to 50% tariffs on goods from countries with which Mexico does not have a bilateral trading agreement. This is an important condition, and one that gives Mexico some cover over concerns it bowed to US pressure to block just Chinese goods flowing through Mexico to the US.
While China has grabbed the headlines as the major trade partner suffering as a result of the new tariffs, it also hits countries such as Brazil, India, Indonesia, South Korea, and Vietnam. The bill encompasses a broad number of products including automotive parts, textiles, furniture, plastics, steel, and aluminum.
Sheinbaum, who proposed the tariffs in September, is expected to approve the legislation, which would go into effect Jan. 1.
Why this matters
Mexico’s action addresses a key concern of the Trump administration—circumvention by China through Mexico.
Passage of the legislation is one thing. Enforcement is another. Mexico’s lack of transparency in publishing its trade data speaks to concerns about how aggressively the government will move to ensure the correct tariffs are applied to the correct goods.
Mexico has again promised publish accurate and timely trade data. Time will tell if they adhere to this. It is critical to see this data to understand the composition of their trade. One would think if they are going to levy 50% tariffs on imported goods, they will want to get exceptionally good at tracking them.
A good example of how money talks in this respect is US data on alcohol sales. The US does a wonderful job of reporting beer, wine, and distilled spirits sales. Why? Because it collects excise taxes on those goods. It would behoove Mexico to rise to the challenge of tracking its imports from the affected countries for the same reason. That 50% tariff would swell Mexican treasury receipts.
These tariffs are a major step to addressing concerns about consistency of tariffs, circumvention, and trade reporting. We still have issues with rules of origin and that comes down to OEM compliance and CBP applying robust audit controls. Lax audit controls have allowed OEMs operating in Mexico to not adhere to the rules. Our discussions with leading customs brokers suggest CBP is increasing its audit procedures. This will include more scrutiny of customs declarations from OEMs and potentially conducting audits of their supply chains.
At the end of the day, we doubt multi-national corporations operating in Mexico are going to want to run afoul of US Customs by falsifying declarations. These companies are not going to risk reputation and major financial consequences. Individuals also don’t want to go to jail over this. We think rules of origin will get much more compliant in 2026.
From a commercial perspective, this will be good for American and Canadian aluminum suppliers to Mexico. It should bring more business as OEMs rotate from non-USMCA origins to USMCA origins.
