Mexico Pushes Auto Tariffs Down to 5-10% in September USMCA Talks

Mexico is proposing a major restructuring of U.S. auto tariffs in ongoing USMCA renegotiations, seeking to cut the effective rate from 25% to between 5% and 10%. Under the proposal, tariffs would apply only to vehicle content sourced outside North America, while parts made in Mexico and Canada would qualify for duty-free treatment. Automakers have warned they may withdraw entry-level models from the U.S. market if a new deal is not reached before the 2027 model year.

How Mexico’s tariff proposal would work

Currently, the U.S. applies a 25% tariff to non-U.S. content in vehicles imported from Canada and Mexico. Mexico’s counterproposal would tax only the portion of a vehicle’s value built outside North America. Since USMCA already requires 75% of a vehicle’s content to originate in North America, the plan would limit the tariff to roughly a quarter of a car’s value or less. The result: a top-line rate between 5% and 10% for qualifying North American vehicles, according to Wall Street Journal reporting.

Why automakers are pushing for lower tariffs

Entry-level vehicle models face the biggest pricing pressure under current tariff rules. Automakers have warned the U.S. administration that they might withdraw their cheapest models from the market if a new deal is not reached. A lower effective tariff rate would ease pressure on transaction prices as manufacturers plan for the 2027 model year and help keep affordable vehicles in showrooms.

The steel tariff fight running parallel

Mexico is also seeking to reduce steel tariffs in the same September negotiations. Secretary of Economy Marcelo Ebrard announced Mexico will propose cutting the tariff on Mexican steel from 50% to 10%, citing increased local production and key investments such as Ternium’s new $4 billion plant. Mexico argues it is the leading buyer of U.S. steel and deserves treatment similar to the United Kingdom’s tariff arrangement.

What remains unresolved in the talks

U.S. and Mexico negotiators have narrowed outstanding issues from 54 to roughly 14, according to CBT News. Automotive rules of origin, steel and aluminum tariffs, and labor enforcement remain the key sticking points. A fourth bilateral round is scheduled for September in Washington, D.C., with Canada talks still unopened. The outcome will determine whether North America remains one integrated factory floor or fragments into three separate markets with different price tags.

Final Thoughts

Mexico’s proposal to cap auto tariffs at 5-10% could reshape North American vehicle pricing and supply chains. The September negotiations will decide whether entry-level models stay affordable or disappear from U.S. showrooms.

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