Mexico Expects US Tariff Relief Despite Delayed USMCA Talks

Mexico City — Mexico said Friday that its tariff negotiations with the United States remain on course, despite the postponement of a key round of talks over the free trade agreement the two countries share with Canada.

Economy Secretary Marcelo Ebrard said he expects to secure relief before the end of the year from the duties weighing on Mexican auto and steel exports — levies that have dented two sectors central to Latin America’s second-largest economy. He told lawmakers in the Chamber of Deputies that a reduction could come “in the coming weeks or months.”

The auto industry has raised alarms over the 25% tariff that Mexican vehicles sold in the United States must pay if they fail to meet the strict rules-of-origin thresholds set by the USMCA, the pact that also includes Canada. Under the US Section 232 provisions, a large share of Mexico’s steel exports faces duties of 50%. Mexico has asked Washington to lower those levies, citing the deep integration of the two economies and their production chains.

“We are surely going to achieve a reduction in the coming weeks or months. That has been the focus,” Ebrard said.

Negotiations delayed, not suspended

The fourth round of talks between the neighbors, originally scheduled for September, was postponed at the last minute because it coincided with a visit to Washington by Chinese leader Xi Jinping. An earlier trip to Mexico City by US Commerce Secretary Howard Lutnick was also cancelled, in that case because of weather conditions. The delays raised questions about how much priority the administration of President Donald Trump places on the trade issues Mexico has put on the table.

“I can’t set the timetable for my counterpart. They also have their own political issues, their own electoral process,” Ebrard said, referring to November’s midterm elections. “But we have not suspended the talks — that is the first thing to be clear about. There are conversations almost every day.”

Auto sector feels the pinch

The stakes are high for Mexico. The auto industry is the country’s leading manufacturing and exporting sector and one of the main reasons North America established its free trade agreements. The sector has begun to feel the first effects of the tariffs: Mexican auto exports posted their steepest decline of the year in September, falling 12% year-on-year, while production tumbled 15%, according to data from INEGI, the national statistics agency.

Mexico temporarily suspended its own 10% tariff on auto parts imports to make components cheaper and improve the financial case for existing and future assembly lines. The relief will not be automatic, however: President Claudia Sheinbaum’s government will monitor companies’ purchases.

“The decree is one element within a regulatory strategy aimed at attracting new production lines, which would eventually give rise to more complex production processes,” the Economy Secretariat said in a statement Friday.

Industry pushes back on stricter rules

The auto sector has also voiced concern about the slow pace of the talks, just as Washington seeks to significantly change the rules governing vehicle assembly and exports in the region. The Mexican Automotive Industry Association (AMIA) presented its arguments this week to the US International Trade Commission, the agency that administers US tariffs and trade law. The industry argued that tightening rules of origin within the USMCA will raise costs and discourage investment.

Currently, 75% of a vehicle’s components must be of regional origin for it to qualify for zero tariffs within the USMCA. Washington wants to raise the threshold to around 82%, while also demanding that half of the parts come from US suppliers — a requirement that challenges the mutual-benefit model on which the three-way agreement was built.

Ebrard could not say when the fourth round of negotiations will take place, though he argued that Mexico retains a relative advantage over other countries that sell to the United States.

“We have the best situation in relation to the United States, as a result of what I would call the most complex review-negotiation so far this century,” he said.