Preparations for the first formal review of the United States-Mexico-Canada Agreement (USMCA, known in Mexico as T-MEC) are now underway, with discussions set to intensify ahead of the mid-2026 deadline. For Mexico’s automotive sector—responsible for exporting over 85% of its production, mostly to the United States—the stakes are high.
In 2025, the United States imposed 25% tariffs on Mexican vehicle imports under Section 232, citing national security grounds. The measure affected approximately 2.7 million vehicles and excluded regional content from tariff exemptions, allowing only U.S.-origin components to offset duties. This significantly raised export costs and disrupted long-standing supply chain dynamics within North America.
Rogelio Garza, executive president of the Mexican Automotive Industry Association (AMIA), has emphasized that restoring tariff-free trade is essential to preserving the sector’s competitiveness. Speaking recently on a financial podcast, Garza noted that the free flow of vehicles and auto parts enabled by T-MEC has been a cornerstone of industry growth over the past three decades. The current tariff regime, he warned, undermines that foundation.
The industry enters the T-MEC review with tariffs still in place.
“The industry enters the T-MEC review with tariffs still in place,” Garza said, underscoring the urgency of resolving trade frictions before they become entrenched.
Despite these headwinds, Mexico’s automotive sector showed resilience in 2025. Vehicle production declined by just 0.9%, while exports fell 2.7%. Domestic sales, however, rose by 1.4%, offering a modest buffer against external shocks. Still, industry leaders argue that long-term stability depends on a favorable outcome from the upcoming treaty review.
The scope of the review is expected to extend beyond tariffs. Stakeholders anticipate negotiations will address electric vehicle (EV) supply chains, labor standards enforcement, and rules governing regional content thresholds. These issues reflect broader shifts in global manufacturing and environmental policy that were not fully captured in the original agreement.
Nearshoring—the relocation of production closer to end markets—remains a potential growth driver for Mexico. But Garza cautioned that its success hinges not only on treaty outcomes but also on Mexico’s internal competitiveness. Infrastructure limitations and regulatory uncertainty could constrain investment unless accompanied by a clear industrial strategy aligned with North American trends.
While Mexican officials and industry representatives prepare their positions, U.S. negotiating priorities remain undefined. This uncertainty complicates planning for manufacturers operating across borders and raises questions about whether tariff relief alone will be sufficient to restore confidence in cross-border trade.
Even if tariffs are lifted, compliance costs tied to revised labor or environmental standards could offset gains. The outcome of the T-MEC review will therefore shape not just trade flows but also investment decisions across North America’s integrated automotive ecosystem.
