Tariff relief sustains Mexico's competitiveness: INA

The National Auto Parts Industry (INA) stated that the exemption from tariffs on vehicle parts and components manufactured in Mexico maintains the competitiveness of the automotive production chain, an advantage that opens the door to attracting investment in new auto parts.

The private organization specified that the respective tariffs will be applied based on metal content (25% on steel content and 25% on aluminum content), but the IEEPA (International Emergency Economic Powers Act) tariff will not be added when the good does not qualify under USMCA.

For example, insulating tubes that incorporate connecting pieces of both metals will be subject to two 25 percent tariffs.

"These adjustments will be applied retroactively to all imports made on or after March 4, 2025, and the corresponding modifications to the U.S. Tariff System (HTSUS), along with guidelines on potential refunds, are expected to be published before May 16," he specified.

Gabriel Padilla, director general of the INA, said that U.S. President Donald Trump's decision to exempt the automotive sector from the 25% tariff represents an "advantage" for Mexico on the global stage.

"We will surely see opportunities for attraction in this high-tech sector, as well as investments in what we call Nearshoring 2.0, which is approaching in 2030," he said.

In the overall scenario of tariffs imposed by the United States on automotive products worldwide, Mexico gained an advantage over the major players in the industry, such as China, with an effective tariff of 131.91%; Japan with 21.37%; South Korea with 20.89%; and Germany with 17.77%.

This, coupled with the fact that USMCA auto parts will be exempt from tariffs, would make Mexico more attractive for attracting investment from auto parts companies to manufacture, rather than importing them with tariffs.

From the INA's perspective, investments will continue because Mexico remains the main destination for automotive parts and components companies; although it acknowledged that new investments are on hold.

"The North American region (Canada, the United States, and Mexico) has a comparative advantage compared to other countries internationally. This means that the disruption of supply chains, which was the primary concern, is not in sight; the industry's competitiveness remains," commented the INA director.

However, Gabriel Padilla admitted that the new way of doing business globally is creating uncertainty. He even argued that it has affected the business climate and strategic planning, and that investments have been postponed this year.

"But we continue to forecast that by 2027 we will remain one of the most integrated industries in North America," he noted.

Trump's orders

On April 29 of this year, U.S. President Donald Trump issued a new Executive Order modifying the application of certain tariffs on products from Mexico and Canada. This measure seeks to prevent the accumulation of multiple tariffs on the same product, especially in sensitive sectors such as auto parts, steel, and aluminum.

“The National Auto Parts Industry (INA) reports that, based on said Executive Order and the guidance issued by the U.S. Customs and Border Protection Office (CBP), it is observed that Mexican auto parts listed in proclamation 10908 that qualify under T-MEC will be exempt from paying any tariffs and those that do not qualify will be exempt from paying the additional tariffs established under the International Emergency Economic Powers Act (IEEPA) and under Section 232 for steel and aluminum.

That is, a steel auto part that does not qualify under the USMCA and that previously could accrue up to three tariffs will now only pay one—the one corresponding to auto parts—reducing the projected tariff burden.

In the overall scenario of tariffs imposed by the United States on automotive products worldwide, Mexico gained an advantage over the major players in the industry, such as China, with an effective tariff of 131.91%; Japan with 21.37%; South Korea with 20.89%; and Germany with 17.77%.