As the United States and Mexico proceed with renegotiations to review the United States-Mexico-Canada Agreement (USMCA), discontent is rising in Mexico's auto industry that the country bears higher tariffs than rival nations Korea and Japan.
Bloomberg reported on the 10th (local time) that the Mexican government and the auto industry are demanding system changes, saying the average effective tariff rate on Mexican-made cars reaches 18.75% even under the USMCA framework. That is higher than Korea and Japan, which, after pledging large investments in the United States last year, apply a 15% tariff to some vehicles through separate trade arrangements. The USMCA, which took effect in 2020, is at its mandatory review point this year, and the United States, Mexico, and Canada are discussing possible revisions. Mexico is said to have recently submitted related materials to the U.S. government, requesting improvements to the auto tariff system.
The USMCA originally provides de facto duty-free benefits for North American-made cars. But to receive those benefits, vehicles must meet complex rules of origin, such as sourcing at least 75% of parts from North America. The problem, Mexico says, is that if those criteria are not met, U.S. auto tariffs of up to 25% apply to Mexican-made vehicles as well. On top of that, Mexico argues it must also shoulder the 2.5% most-favored-nation (MFN) tariff.
According to Mexico, compliance with the agreement is also not cheap. Industry officials said production costs rise by about 3% due to administrative procedures and verification expenses required to prove the share of U.S.-made parts.
Given these expenses and risks, the Mexican government argues that despite being a USMCA member, the actual burden has grown heavier than that of competitors Japan and Korea. By Mexico's calculation, even after reflecting the tariff-reduction effect on U.S.-made parts, the average effective tariff rate reaches 18.75%. For a Mexican-made car priced at $50,000 (7,619,000 won), the tariff burden comes to about $9,375 (about 1,428,000 won), while for Korean and Japanese vehicles it is around $7,500 (1,142,000 won).
Mexico Economy Secretary Marcelo Ebrard noted last month that only about a 15% tariff is being applied to Korea and Japan, Mexico's main competitors in the auto industry. Mexico is said to have recently submitted related materials to the Office of the U.S. Trade Representative (USTR), demanding system improvements. In response, USTR officials told Mexico they understand that Mexican-made cars should be positioned better than vehicles from other countries and that alternatives are under review, but they reportedly showed some disagreement with Mexico's tariff calculation method.
Meanwhile, the tariff burden cited by Mexico is affecting industry production strategies. Nissan Americas said that under the current system, vehicles assembled in Mexico may be exposed to higher tariff burdens than imports from other regions. Some Asian automakers are reassessing the economics of production in Mexico, and Nissan announced in Oct. 2025 that it would end production at its Compas plant in Mexico.
Diego Marroquín, a researcher at CSIS, a Washington-based think tank, warned, "The current tariff structure is not sustainable," adding, "Thousands of jobs have already disappeared, and absent changes, plant closures in Mexico and Canada will follow."