Mexico-US Trade Deficit Reaches $197 Billion: Is Trump Preparing New Tariffs?

Washington may also demand greater traceability to determine if a good was genuinely manufactured in Mexico or if it contains a significant proportion of Asian inputs. Greer indicated that the US government is studying tariffs, quotas, or other mechanisms to control the deficit. He also proposed increasing US content in vehicles produced in North America and strengthening requirements for electronics and other strategic goods.

The strategy aims to attract investment to the United States. However, excessive tightening could increase costs for US companies themselves that rely on components manufactured in Mexico.

Tariffs Would Also Increase Costs in the United States

The exporting country does not directly pay the tariff at the border. The US importer covers the tax at customs. This cost can then be absorbed through lower margins, negotiated discounts with the Mexican supplier, or passed on to the prices paid by other companies and consumers. The experience with US tariffs applied under Sections 232 and 301 shows a considerable transmission to import prices. The United States International Trade Commission (USITC) calculated that a 10% tariff on certain Chinese products increased the price paid by US importers by approximately 10%.

Therefore, new tariffs on Mexican products would have effects on both sides of the border. Mexico would face reduced demand, order losses, margin pressure, and potential investment delays. The United States would receive more expensive inputs for manufacturing vehicles, machinery, electronic devices, and other goods. Tariffs can benefit certain US producers protected from foreign competition. However, they also affect industries that use imported materials. The USITC estimated that tariffs applied to steel and aluminum between 2018 and 2021 reduced the value of production for US industries using those metals by an average of $3.4 billion annually.

Automotive Sector Faces the Greatest Political Risk

The automotive industry holds a central position due to the volume of vehicles and components Mexico exports to the United States. Combined deficits in automobiles, trucks, and other auto parts exceeded $123 billion in 2025, although the differences in cars and heavy vehicles decreased compared to the previous year. The primary risk could come in the form of more demanding rules of origin. An obligation to use more US content would alter purchasing decisions by automakers and suppliers.

Companies would have to substitute components, reorganize contracts, or relocate processes. Factories with consolidated regional networks would face less adaptation than those dependent on parts from Asia. A direct tariff on Mexican vehicles would also increase the price of units sold in the United States. The effect would depend on how much automakers absorb and how much they pass on to the buyer.

Electronics and Manufacturing Face Increased Scrutiny

Electronics emerge as one of the most exposed sectors due to the growth of Mexican computer exports. The United States could review the origin of semiconductors, circuit boards, batteries, screens, and other components used in equipment assembled in Mexico. A stricter rule would aim to prevent products with high Chinese content from accessing the North American market under preferential terms. The electrical, metalworking, and machinery manufacturing industries also face risks. These industries use steel, aluminum, copper, and imported components that could be subject to sectoral tariffs. Mexican plants demonstrating higher regional content could retain advantages. Companies with opaque supply chains or high Asian dependence would face greater compliance costs.

Agribusiness Has Less Weight in the Deficit, but Higher Sensitivity

Agribusiness does not account for as large a proportion of the deficit as vehicles or computers. However, it maintains high political and social sensitivity. Mexico supplies fruits, vegetables, beer, beverages, and other food products to the US market. The United States sells corn, meat, dairy, soy, and processed products to Mexico. Agricultural tariffs can be quickly passed on to prices and affect specific production seasons. They can also provoke retaliatory measures targeting products from politically relevant regions. For this reason, agribusiness functions as a negotiation piece, even if its monetary weight is less than that of electronics and the automotive sector.

Mexico Retains Negotiation Leverage within the USMCA

The lack of an agreed-upon extension during the 2026 review does not lead to the immediate dissolution of the USMCA. Article 34.7 establishes an initial term of 16 years. The treaty entered into force in July 2020, meaning it can remain active until 2036 if none of the countries formally initiate withdrawal. When one party does not confirm an extension for another 16-year period, governments must conduct annual reviews during the remaining time. They can also subsequently agree to a new extension.

Mexico retains negotiation capacity due to the integration of industrial supply chains. US factories need Mexican components, and plants located in Mexico use machinery, energy, technology, and inputs originating from the United States. The Mexican government can offer increased customs surveillance, origin controls for goods, and commitments to expand regional content. In return, it will seek to preserve preferential access for companies that comply with the treaty and avoid general measures that affect all Mexican manufacturing.

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