Brazil Tariffs: Mexico's New Gateway to the United States?

The trade war that Washington has waged in recent years against its main partners has been shifting fronts. First it was China, then the European Union, and now, with a historic tariff burden, it’s Brazil’s turn. Every time the United States imposes tariffs on a supplier, the same question arises among analysts and business leaders: who will fill that space in the world’s largest market? For Mexico, which has been betting on nearshoring as a growth lever for years, the sanction on Brazilian products opens a window worth examining carefully, without falling into easy optimism or automatic skepticism.

Brazil Under the Weight of a Double Tariff

Effective July 22, 2026, the Office of the United States Trade Representative (USTR) will impose an additional 25% tariff on all Brazilian imports. This is a result of an investigation under Section 301 that documented unfair practices in digital trade, intellectual property, market access for ethanol, and illegal deforestation.

What few may recall is that this would not be the first blow: since August 2025, Brazil has already faced an additional 40% tariff under the International Emergency Economic Powers Act (IEEPA), imposed by presidential decree.

Both tariffs will accumulate for a significant portion of products, according to guidance issued by U.S. Customs and Border Protection (CBP). This means that certain Brazilian goods will face a combined burden of nearly 65% upon entering the U.S. market from that date forward.

Not all products bear this full weight. Both schemes provide for exemptions for inputs that the United States cannot easily substitute, such as tropical wood, aluminum oxide, certain minerals, and some agricultural products.

Steel, aluminum, copper, and passenger vehicles, for example, were excluded from the 40% IEEPA tariff but remain subject to the 25% Section 301 tariff. Conversely, sectors such as footwear, textiles, chemicals and petrochemicals, electrical equipment, construction machinery, leather, and semiconductors did not obtain exemptions under either scheme.

During USTR public hearings, warnings were issued about the impact on U.S. consumers. Representatives from the electrical sector pointed out that the tariff would increase the cost of infrastructure for artificial intelligence, while voices from the footwear industry alerted about the blow to small retailers. This confirms that the tariff is not symbolic but a real and sustained barrier for several Brazilian productive sectors.

Mexico Already Competes Where Brazil Retreats

The contrast becomes clearer when looking at the automotive sector, one of the sectors frequently mentioned in the import substitution debate. In May 2026, the United States imported $15.535 billion worth of vehicles and auto parts from Mexico, compared to just $109 million from Brazil.

The difference is so vast that talking about a “new automotive opportunity” for Mexico would be misleading: the advantage already exists and is abysmal. In fact, the USTR’s own record acknowledges that Brazil already grants Mexico preferential tariff treatment on auto parts superior to what it offers the United States, which has incentivized manufacturers to relocate production to Mexican territory. This reveals that Mexico’s competitiveness in the automotive sector does not depend on penalizing Brazil but on conditions that were already in motion.

Where the analysis does gain more traction is in non-automotive manufacturing. Data from the Bank of Mexico shows that Mexico’s automotive exports to the United States fell by 4.8% in the January-May 2026 period, while other manufactures grew by 36.2% in the same period.

This shift also coincides with a finding by the Bank of Mexico itself: between 2018 and 2023, it was precisely the transportation equipment, computing, and food industries that drove Mexico’s increased share of U.S. manufacturing imports. In other words, substituting suppliers like Brazil in sectors such as electrical and electronic equipment would not be a new phenomenon but the continuation of a trend that was already benefiting Mexican industry before the current tariff existed.

Is There Installed Capacity to Handle More Orders?

Here, it’s wise to temper enthusiasm. INEGI’s Monthly Survey of Manufacturing Industry reported that in March 2026, the number of occupied persons in the sector fell by 2.5% year-over-year, although the physical volume of production advanced by 1.1% in the same period.

The reading is mixed: there is growth in volume, but not necessarily in the labor force supporting it, suggesting productivity gains rather than accelerated plant expansion.

The maquiladora program (IMMEX) offers a complementary perspective. Baja California concentrates 17.3% of the program’s active establishments, and Nuevo León 13.8%. Within subsectors, transportation equipment accounts for 1,130 establishments with 246,978 million pesos in foreign market revenue, while computing and electronics has 391 establishments with 31,778 million pesos from the same market. These figures indicate an already installed industrial base geared towards exports, not an industry that needs to be built from scratch to capitalize on the current situation.

Banxico’s Report on Regional Economies adds a relevant nuance: executives consulted in the northern region of the country attributed part of their recent performance to investments in automation, in some cases supported by artificial intelligence, which allowed them to reduce production costs. This suggests that the Mexican industry’s response to increased demand would not come solely from building more factories but from modernizing existing ones. However, none of the available sources provide a concrete figure for idle capacity by sector, so the most honest conclusion is that there are signs of maneuverability, but no quantified certainty of how much additional demand could be absorbed without friction.

The States That Would Be in the Spotlight

If the phenomenon materializes, Mexico’s industrial geography already offers clues as to who would capture the greatest benefits. Chihuahua leads the list with 19.9% of the country’s total state exports in the fourth quarter of 2025, followed by Jalisco with 12.1%. Coahuila and Nuevo León share third and fourth place with 9.7% each, and Guanajuato ranks sixth with 5.7%. Querétaro appears further behind, in eleventh place nationally with a 2.9% share, although its annual growth rate of 16.6% was higher than that of several better-positioned states.

The breakdown by subsector confirms this hierarchy and nuances it. In transportation equipment, the largest exporters are Coahuila, Guanajuato, Nuevo León, San Luis Potosí, and Chihuahua. In computing and electronics equipment, Chihuahua and Jalisco concentrate over 75% of the export value in this category, followed by Baja California, Nuevo León, and Tamaulipas. In electrical equipment, Nuevo León heads the list, followed by Chihuahua, Tamaulipas, Baja California, and Coahuila. Querétaro does not rank among the top five in any of these subsectors in the available data, which does not mean it is out of the game, but rather that its benefit would depend more on specific niches, such as aerospace, rather than an aggregate weight comparable to that of the other five states.

USMCA: The Advantage That Still Needs Consolidation

No analysis of this opportunity would be complete without considering the legal framework that supports it. The Mexican Business Council for Foreign Trade (COMCE) has emphasized that Mexico currently maintains the lowest effective tariff rate against the United States among its main trading partners and could increase its share of U.S. imports from 16.4% to 19% within three years. Sergio Contreras, the council’s executive president, warned that this relative advantage “does not imply an absence of risks” and called on Mexican companies to “reinforce market diversification, optimize their value chains, and strictly comply with rules of origin and international standards to fully leverage the USMCA framework.”

The Business Coordinating Council, for its part, has insisted that the treaty underpins regional trade exceeding three million dollars per minute and supports 17 million jobs across the three countries.

However, describing the USMCA as an unshakeable guarantee would be inaccurate. The mandatory joint review of the agreement, conducted on July 1, 2026, concluded without formal renewal. The treaty remains in effect until 2036, but the United States has entered a period of annual reviews and bilateral negotiations to address what it considers deficiencies in the agreement, with a new round of talks between Mexico and the United States scheduled for the week of July 20. Concurrently, the U.S. Congress is debating whether to strengthen or curtail the presidential authority to impose tariffs on Mexico and Canada under mechanisms like IEEPA and Section 232, making it clear that Mexico’s competitive advantage over Brazil coexists with its own frictions, which are not always visible when celebrating the country’s relative position.

From Theory to Practice

In summary, the opportunity exists and has measurable foundations: a real and cumulative tariff on Brazil, a Mexican industry already present in the same sectors, signs of investment and productive modernization, and a trade agreement that, despite its internal tensions, remains the most stable reference in the region.

Converting this combination into additional exports will depend, above all, on Mexican companies resolving what business sources themselves already identify as the pending task: complying with rules of origin, diversifying markets, and sustaining investment in productive capacity before the window, as has occurred with other tariff episodes, closes as quickly as it opened.