Mexico Nears Interim Deal With U.S. to Cut Auto, Steel and Aluminum Tariffs

Mexican trade officials are growing increasingly confident of reaching an interim commercial agreement with the United States to reduce steep American tariffs on key exports, including light vehicles, steel, and aluminum, according to government sources familiar with the negotiations [1]. The bilateral talks come amid a broader slowdown in nearshoring activity and foreign investment in Mexico, driven by uncertainty surrounding the upcoming annual review of the U.S.-Mexico-Canada Agreement (USMCA) [1].

Under the terms currently being negotiated, Washington would lower its tariffs on light vehicles originating from Mexico from 25% to 15%. Because the full tariff rate applies strictly to non-U.S. content, Mexican officials estimate the effective tariff burden on light vehicles would settle between 10% and 12% [1]. Mexican negotiators are pushing for concessions superior to those granted to Canada last month, when Washington offered Ottawa a nominal rate of 15% that can drop to roughly 7% after applying the maximum allowable regional content discount [1].

Officials are also working to secure reductions on American tariffs covering steel and aluminum exports, which currently sit at 50%. Negotiations on metals remain active, though the precise extent of potential tariff cuts is still undetermined [1].

What's on the table

On September 21, President Claudia Sheinbaum said Mexico is planning to buy more goods from the United States and reduce imports from other nations as part of the USMCA review, telling her daily morning press conference: "The United States is asking for its so-called trade deficit to be reduced" [2].

Mexico has already moved to curb imports from China. At the beginning of 2026, the country imposed tariffs of as much as 50% on a range of products from countries with which it does not have free-trade agreements, including China — duties covering automobiles, auto parts, textiles, steel, and appliances [3]. The U.S. and Mexican officials began the USMCA review process in March with an explicit focus on reducing dependence on imports from outside North America and strengthening regional supply chains [3].

Policy experts caution that any reductions to existing Section 232 or Section 301 tariffs will require reciprocal concessions. "It is difficult to imagine that the White House will reduce existing Section 232 and Section 301 tariffs without asking Mexico for something in return," said Diego Marroquín, a scholar at the Center for Strategic and International Studies (CSIS) Americas Program, and Juan Baker, a fellow at the Georgetown Americas Institute, in a joint analysis. Washington's demands, they wrote, could range from limited administrative changes to broader shifts in trade policy, export controls, transshipment regulations, and measures targeting non-market economies — specifically China [1].

Why it matters

Tariff relief is a critical economic priority for Mexico's automotive sector, which directly employs approximately 800,000 workers and exports the vast majority of its vehicle production to the United States. Mexico also stands as the primary foreign supplier of auto parts to the U.S. market [1].

Trade friction is weighing on real-economy investment. A report from consulting firm Deloitte shows foreign direct investment reached $34.9 billion in the first half of 2026, but net new investments fell 23% compared with the same period in 2025. Companies made only 73 investment announcements in the first half — a 55% decline year-over-year — and of $286.3 billion in announced investments recorded between 2023 and June 2026, only 11.3% have entered operational status while 42% remain under construction [1].

Diplomatic engagement continues at the executive level: Mexican Economy Minister Marcelo Ebrard met with U.S. Trade Representative Jamieson Greer in Milwaukee on the sidelines of the G20 Trade Ministers' Meeting, taking place September 30 and October 1, with formal USMCA review negotiations scheduled to resume in October [1].

Terms

• USMCA: the United States-Mexico-Canada Agreement, the North American trade pact that replaced NAFTA and is now undergoing a scheduled joint review.
• Section 232 tariffs: U.S. import duties imposed on national-security grounds, applied here to steel and aluminum.
• Nearshoring: the relocation of production to countries close to a company's main market, a trend that has drawn manufacturers to Mexico.

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