Mexico puts steel and the auto industry front and center in talks with the United States ahead of the USMCA review
Section 232 tariffs are reshaping the trade negotiations and are already showing up in lower Mexican exports.
The USMCA review kicked off its second round of talks in Mexico with a clear signal on priorities: steel and the automotive industry topped the agenda in front of the U.S. Trade Representative (USTR), Jamieson Greer. The reason is straightforward: both sectors have become Mexico’s main pressure point since Donald Trump’s administration reactivated Section 232 tariffs in 2025—an American legal tool that allows trade restrictions on “national security” grounds.
The sequence of meetings was no accident. Steel and autos account for a large share of bilateral trade and are pillars of North America’s production integration. That’s why the tariff hit quickly translates into higher costs for exporters, production-plan adjustments, and, at the margin, investment decisions. For Mexico, the issue also arrives amid an economic slowdown and heavy dependence on external demand: export-oriented manufacturing remains a key driver of formal employment and foreign-currency inflows.
Data from the Bank of Mexico already show a slowdown. In 2025, Mexican exports of foundry products, iron, and steel to the United States fell 24% compared with 2024, while shipments of manufactured goods tied to those products dropped 9%. Early in 2026, the pullback deepened: in the first two months of the year, declines reached 54% for steel products and 16% for manufactured goods versus the same period in 2025. In the transportation equipment category—which includes light vehicles and auto parts—exports fell 7% in 2025 and 17% in the first two months of 2026.
Economy Secretary Marcelo Ebrard has emphasized that Section 232-related tariffs will be a central topic in the talks. For Mexico, the challenge is twofold: limit the immediate damage to trade flows and prevent these measures from becoming a new “floor” of protectionism that reshapes supply chains that took decades to build.
At the meeting held at the Club de Banqueros in Mexico City, the USTR heard from leading business representatives from both sectors. On the automotive side, the Mexican Automotive Industry Association (AMIA) participated along with executives from automakers with a significant presence in the country. From the steel industry, leaders from producing and processing companies attended, as well as representatives from the sector’s trade group.
Section 232, contained in the Trade Expansion Act of 1962, allows the U.S. president to impose tariffs following a Commerce Department investigation that concludes imports threaten national security. In 2025, the Trump administration expanded its use in sectors deemed strategic, directly affecting steel, aluminum, and products linked to the automotive industry.
On steel and aluminum, the White House argued that global overcapacity—with emphasis on China’s pressure on international prices—justifies higher barriers to protect domestic production. In March 2025, a 25% tariff was set and, in June, it was raised to 50%, while exemptions were eliminated and coverage was expanded to derivative products. This was paired with a stricter rule for proving origin, aimed at discouraging transshipment.
For the automotive sector, the tariff announced in April 2025 set a 25% rate on imported vehicles and was later extended to auto parts. In this case, the “national security” argument comes with a key nuance for Mexico: USMCA integration creates room for exemptions or differentiated treatment if rules of origin are met, although the calculation methods and content requirements increase complexity and compliance costs.
Nearshoring, investment, and the risk of a higher “North America cost”
The tariff episode arrives as Mexico seeks to capitalize on nearshoring—relocating production processes to North America to be closer to the U.S. market. However, regulatory and trade uncertainty can raise the “North America cost”: if strategic inputs such as steel, aluminum, or auto components face recurring barriers, long-term planning becomes more difficult. For new investment, the equation no longer depends only on logistics, talent, and energy, but also on the likelihood that sector-specific tariffs could emerge even under an existing trade agreement.
In practice, this could have two effects. First, it could push companies to redesign their supplier base to maximize regional content and reduce exposure to duties—requiring additional investment and, in some cases, supplier substitution. Second, it could create bottlenecks and raise costs for downstream industries (auto parts, machinery, construction), with potential impacts on prices, competitiveness, and margins. For Mexico, the challenge will be to maintain its manufacturing appeal without losing agility under stricter rules in the United States.
In the short term, a sustained drop in exports in these categories could translate into weaker industrial momentum in regions deeply tied to foreign trade—the Bajío, the north, and border areas—and into shift reductions or cuts to capital spending. In the medium term, the negotiation will determine whether the USMCA keeps serving as an “anchor” of certainty or whether it will coexist with a tariff-exemption regime that, in practice, reduces its benefits.
Looking ahead, the outcome will depend on Mexico’s ability to make the case for its role in regional supply chains, prove compliance with rules of origin, and—above all—negotiate frameworks that preserve the flow of strategic goods. For now, the message from the start of the round is unmistakable: steel and autos are the thermometer of the economic relationship with the United States and, at the same time, the point where part of Mexico’s manufacturing competitiveness in 2026 is on the line.
