Tariff exemption for auto parts is temporary: US

U.S. Customs and Border Protection (CBP) reported that the 25% tariff exemption on auto parts from Mexico and Canada is temporary.

Starting May 3, 2025, the new 25% tariff went into effect on U.S. imports of these products originating from around the world.

But in a guidance, CBP clarified that the application of tariffs to auto parts under Section 232 will be exempt for products originating under the United States-Mexico-Canada Agreement (USMCA) under certain conditions.

If automotive parts imported from Mexico or Canada into the U.S. market comply with the USMCA's rules of origin, they will be exempt from the 25% tariff for at least 90 days after the measure's effective date, or until a process is established to apply the tariff only to non-U.S. content.

This clarification is important because the proclamation previously issued by US President Donald Trump established the exclusion in a general manner, and it could be understood as permanent.

In any case, for now, this exemption remains temporary, although there is room for negotiations regarding a possible adjustment.

In 2024, Mexico exported auto parts to the United States worth $82.456 billion, representing 42.9% of total U.S. foreign purchases of these goods, according to data from the Department of Commerce.

Among other products, the tariffs apply to all imported passenger vehicle parts (sedans, sport utility vehicles, crossover utility vehicles, minivans, and cargo vans) and certain light truck parts.

On April 29, 2025, President Donald Trump announced two key tariff measures: an Executive Order on cumulative tariff enforcement and a new Section 232 Import Offset Program for auto parts.

The Executive Order establishes clear limits on when tariffs can be accumulated. If the Section 232 auto tariff is applied, no additional tariffs can be applied under the IEEPA (Emergency Border Protection Act with Mexico or Canada), nor can the Section 232 steel or aluminum tariffs.

Similarly, if IEEPA tariffs are triggered due to border emergencies, steel or aluminum tariffs are not added together. However, if a product is subject to both steel and aluminum tariffs, then cumulation is permitted. Furthermore, this provision applies retroactively to March 4, 2025.

On the other hand, the US government will support US producers with tax credits of 3.75% of the value of the automobile in the first year (2025-2026), and 2.5% in the second year (2026-2027) in order to reduce the tariff burden on all imported items not originating in the USMCA.

The Ministry of Economy argued that the new measures grant Mexican exporters preferential treatment with zero tariffs on engines, harnesses, suspensions, and other components manufactured in the USMCA region that are used in the assembly of light vehicles in the United States.

The legal framework

Section 232 of the Trade Expansion Act of 1962 empowers the President to adjust tariffs on imports that threaten U.S. national security.

On the other hand, the IEEPA is a United States law enacted in 1977 that grants the President special powers to respond to foreign threats that affect the country's national security, foreign policy, or economy.

U.S. Customs imposes a 25% tariff on imported cars and light trucks from Mexico and Canada, with a discount on the value of U.S. content.

According to the most recent data published by INEGI (National Institute of Statistics and Geography), Mexico recorded production of 338,669 light vehicles in March, a year-over-year increase of 12.1%, significantly increasing after having declined -0.8% in February.

Mexican auto exports reached 296,964 units, representing a 3.8% increase compared to March 2024 and a step up after three consecutive months of declines.

According to Intercam, auto insurance inflation in Mexico stood at 2.4% in the second half of March. Meanwhile, annual inflation for car purchases remained at 0.4%.

On April 29, 2025, President Donald Trump announced two key tariff measures: an Executive Order on cumulative tariff enforcement and a new Section 232 Import Offset Program for auto parts.