Mexico's Exposure to U.S. Tariff Threats and Its Impact on Automotive Exports

The U.S. tariff regime under President Donald Trump has cast a long shadow over Mexico's automotive sector, particularly its truck manufacturing industry. With 25% tariffs on auto imports and 50% tariffs on steel and aluminum, Mexico's export-dependent automakers face a dual challenge: navigating trade barriers while recalibrating supply chains to maintain competitiveness. For Mexican truck manufacturers, the stakes are especially high. In July 2025, heavy-duty truck exports plummeted 51.6% year-over-year, with 94.9% of these exports directed to the U.S. market, according to an AP News report. The October 2025 announcement of a 25% tariff on all heavy-duty trucks manufactured outside the U.S. threatens to further erode Mexico's dominance in this segment, as it accounts for 78% of the U.S. medium- and heavy-duty truck market, according to a Mexico News Daily article.

The Vulnerability of Mexican Truck Manufacturers

The automotive sector is a cornerstone of Mexico's economy, contributing 32% of its exports and supporting nearly one million jobs, according to the AP report. However, the sector's reliance on the U.S. market has left it exposed to geopolitical shifts. The U.S. tariffs, framed as part of an "America First" agenda, have disrupted production and forced companies like Stellantis to temporarily halt operations in Mexico and Canada, leading to 900 temporary layoffs in U.S. states like Michigan and Indiana, the AP report says.

For truck manufacturers, the impact is twofold. First, tariffs on raw materials-such as the 50% duty on steel and aluminum-have inflated production costs. Second, the October 2025 25% tariff on finished trucks raises the price of Mexican-made vehicles in the U.S., threatening their competitiveness against domestic brands like Peterbilt and Freightliner, as noted in the Mexico News Daily article. According to a report by FreightWaves, Mexican truck producers have already seen wholesale sales drop 60.1% year-over-year in July 2025. Industry leaders, including Rogelio Arzate of Anpact, warn that trade uncertainty will likely depress sales until the U.S.-Mexico-Canada Agreement (USMCA) renegotiation provides clarity, the AP report adds.

Resilient Investment Alternatives in the Global EV Supply Chain

Amid these challenges, Mexico is pivoting toward electric vehicles (EVs) as a strategic countermeasure. The country's automotive sector must adapt to a future where EVs account for a growing share of global demand. According to MONET projections, Mexico will need to shift up to 50% of its production to EVs by 2035 to maintain its North American market share. This transition is not without hurdles, but it presents opportunities for resilient investment.

1. Policy-Driven EV Initiatives

Mexico's government has launched initiatives like Plan Mexico and the Olinia EV project to bolster domestic EV production and reduce reliance on the U.S. market, according to the UC Davis post. These programs aim to attract investment in battery manufacturing, charging infrastructure, and regional supply chains. Additionally, the "Made in Mexico" campaign seeks to stimulate domestic consumption of EVs, which could insulate the sector from external trade shocks.

2. Diversification into Latin America and Southeast Asia

Mexican automakers are also exploring new markets in Latin America and Southeast Asia, where EV adoption is accelerating. For example, Chinese automaker BYD has established operations in Brazil by repurposing an old Ford plant, signaling a shift in global EV manufacturing dynamics, as the AP report notes. Mexico's geographic proximity to Latin America and its existing manufacturing expertise position it to become a regional EV hub.

3. Strategic Partnerships and Nearshoring

To mitigate U.S. tariff risks, automakers are forming cross-border partnerships. Stellantis's joint venture with China's Leapmotor and Hyundai's Georgia-based EV facility exemplify strategies to localize production and access U.S. incentives like the Inflation Reduction Act (IRA), as noted in a Bain analysis. The IRA's $65 billion investment in domestic EV supply chains has also incentivized companies to nearshore operations to the U.S., but Mexico remains a critical node in regional supply chains due to its cost advantages and USMCA compliance, the Mexico News Daily article observes.

4. EV Supply Chain Resilience

The global EV supply chain is increasingly fragmented, with companies diversifying suppliers to avoid bottlenecks. Mexico's role in this ecosystem is evolving: while it faces competition from Southeast Asia for mineral resources, its established automotive infrastructure and skilled labor force make it a viable partner for EV component manufacturing, the Bain analysis explains.

Conclusion: A Path Forward

Mexico's automotive sector stands at a crossroads. While U.S. tariffs have exposed vulnerabilities in its truck manufacturing industry, the shift toward EVs offers a pathway to resilience. By leveraging policy-driven initiatives, diversifying markets, and forming strategic partnerships, Mexico can transform its exposure to trade volatility into a competitive advantage in the global EV supply chain. For investors, the key lies in supporting projects that align with regionalization trends and long-term sustainability goals.