Tariff uncertainties have companies in Mexico on their toes

Al Jazeera

02-04-2025

On March 4, the US-Mexico border was at a standstill. The trucks that Thor Salayandia was planning to send across a checkpoint to the United States sat in the lot. The only thing moving was the confusion in the air.
Salayandia owns and operates a factory in Juarez, Mexico that makes auto parts and ships truckloads of metal tubes to warehouses in the US state of Texas for assembly. For the past month, his business has been thrown into turbulent waters.
'It's becoming a political game … so for two days there was a considerable reduction in traffic. Even the US officials didn't know whether to charge the trailers that were crossing,' he said, referring to the tariff threats and counterthreats between the US and Mexico. 'There's so much at play … It's misinformation, confusion, and uncertainty. There are a lot of unknowns, about how the tariffs will be introduced, how they'll fit, how they'll be charged.'
US President Donald Trump's complicated tariff policies have left major industries that do business between Mexico and the US, from cars, to agriculture, to textiles, scrambling to comply with the changing rules and questioning their futures.
On March 26, Trump announced new 25 percent tariffs on cars and car parts manufactured abroad that will go into effect on April 3. The tariffs will force Salayandia to cut down his workforce, and he is beginning to think about alternate location options for his factory – including a move to Texas, where he would invest in automation and robots in the manufacturing process to avoid the high costs of labour.
'Past politicians saw a globalised world in which things were manufactured in lower-cost countries … but now, with the arrival of Trump, who has an alternate economic vision of the world, manufacturers are starting to think about changing the way of producing things,' Salayandia said.
On March 4, when his trucks were stuck at the border, a 25 percent tariff was set to go into effect on goods the US imported from Mexico. But as the Mexican business community waited with bated breath to see if President Claudia Sheinbaum could negotiate her way out of the order, Trump announced that goods counted under the USMCA (the United States-Mexico-Canada Agreement, or T-MEC, as the trade pact is known in Spanish) would be exempt from the tariffs until April 2. This would leave over half of imports safe from tariffs for another month.
The new rule was not a complete sigh of relief for business leaders in Mexico, who say the atmosphere of uncertainty is ongoing, as they hurry to comply with T-MEC, and worry about policies coming down the pipeline.
Mexican politicians have been quick to point out that the Mexican peso has remained fairly stable, between 20 and 21 pesos to the dollar.
Mexico's Economy Secretary Marcelo Ebrard said he would work with companies, especially the goliath automotive industry, to fit 90 percent of exports within the guidelines of the T-MEC agreement. But that could take many months to complete. Now, with the new auto-focused tariffs announced last week, all of those efforts may have been in vain.
'What we are looking for is preferential treatment for Mexico, in a way that we can protect jobs and economic activity in our country,' Ebrard said in a news conference on March 27. 'We have already had six meetings with the [US] commerce secretary… there is no other country that has this level of communication with the United States.'
Around 40 percent of car parts used in vehicles sold in the US were manufactured across the border in Mexican cities whose economies rely on auto factories. The Mexican automotive industry generates over $100bn in annual revenue and exports over three million cars, predominantly to the US.
Alberto Bustamante, director of Mexico's National Agency of Automotive Industry Providers, said the tariffs are affecting the automotive industry in varying ways, depending on whether a company exports parts or whole assembled cars. It also involves more philosophical questions, like 'What constitutes a car?'.
'As the private sector, we don't have options. If it depended on us, we would have already figured it out, but it doesn't depend on us, it depends on the government,' Bustamante said. 'In the US, five million jobs are at stake if these tariffs go into effect, and in Mexico, one million.'
He said that specialty and luxury vehicles with uncommon parts will be those most affected by the current tariffs, as well as those made with steel or aluminium, because Trump has additionally placed a 25 percent tariff on goods made with those metals, which kicked in on March 12.
Because of how difficult and time-consuming it would be to fit within T-MEC guidelines, affected companies must decide whether paying the 25 percent tax is worth it, or whether they should just shut shop in Mexico and move their businesses elsewhere.
Sheinbaum, instead of focusing on the current turbulence, has set her sights on reforming the T-MEC deal to ensure long-term stability for the Mexican economy. But she won't get that opportunity until 2026, when the agreement is up for review. Should Trump implement the auto industry tariffs on April 3, Mexico will respond with counter-tariffs.
In the meantime, Bustamante said that automakers are beginning to rethink their 10-year plans and are considering either abandoning Mexico as a manufacturing hub, or turning their gaze away from the US as their primary market.
Cars aren't the only products whose status sits in purgatory. Other goods, from washing machines to peanuts to medical instruments, also have varying degrees of compliance with the T-MEC trade deal.
Avocados – a nearly $3bn industry, and the culinary pride of Mexico – do not always fit into T-MEC, depending on the harvesting and sanitation processes used by specific companies. Mexico sends more than two billion pounds of avocados every year to the US, and the tariffs could push prices up for the popular fruit as Mexican avocado growers rush to make sure their orchards comply with T-MEC regulations.
'Our plan is to open new markets,' said Eleazar Oceguera, director of the Association of Producers and Exporters of Avocados in Jalisco. 'If there's any problem, we want an alternative. We can't concentrate on just one market anymore.'
Both Oceguera and Bustamante said the real cost would come to the American consumer, as thousands of products will become more expensive, with car prices rising several thousand dollars per vehicle.
The atmosphere of uncertainty has spread even to industries that entirely fit within T-MEC guidelines, because Trump is considering applying sweeping tariffs. Such a scenario would push the Mexican economy into a recession, while the US economy would face price hikes.
'We will always defend Mexican companies, it's part of our fundamental work', Sheinbaum said on March 27. 'The essence of the T-MEC trade deal is that there should not be tariffs. That is the essence.'