Mexico’s Tariffs Under the April 2025 Executive Order
On April 2, 2025, the President of the United States issued an executive order establishing a new reciprocal tariff policy. While the order applies a general 10 percent ad valorem tariff to most imports, it also includes country-specific measures and preserves sector-specific tariffs under Section 232 of the Trade Expansion Act. This document outlines the current application of these measures to Mexican exports, based solely on the official statements and proclamations published by the White House.[1]
Mexico is not included in the list of countries subject to the elevated country-specific tariffs in Annex I of the April 2025 executive order. Therefore, Mexican exports are not subject to the general 10 percent ad valorem tariff applied to all imports from other countries. However, Mexico is explicitly included in other tariff provisions targeting specific product categories, particularly under Sections 3(d) and 3(e) of the executive order.
Goods imported from Mexico that do not qualify as originating under the USMCA are now subject to a 25 percent ad valorem duty. In contrast, goods that meet the origin requirements under USMCA continue to enjoy duty-free preferential access to the U.S. market. This creates a binary tariff structure:
- USMCA-Originating Goods: Benefit from zero tariffs under USMCA.
- Non-Originating Goods: Face a 25 percent ad valorem duty, unless otherwise exempt.
If the border-related national emergency proclamations (related to illicit drugs or illegal migration) are terminated, the default tariff on non-originating Mexican goods would be adjusted to 12 percent, as stated in Section 3(e).
Steel and Aluminum
Mexico was previously exempted from Section 232 tariffs (25 percent on steel, 10 percent on aluminum) through bilateral arrangements. However, proclamations issued in February and March 2025 eliminate these exemptions. As a result, steel imports from Mexico are now subject to a 25 percent tariff and aluminum imports are subject to a 10 percent tariff, consistent with the treatment of other exporters.
Automotive Industry
The automotive industry is directly affected by Section 232 tariffs reinstated under Proclamation 10908 on March 26, 2025. This proclamation imposes a 25 percent tariff on passenger vehicles, light trucks and critical auto parts (such as engines, transmissions and electronic systems) that do not meet USMCA origin criteria.
Manufacturers whose supply chains include non-USMCA components or do not meet required labor value content thresholds are subject to these tariffs. Compliance with USMCA requirements is therefore essential for maintaining tariff exemptions.
It should be noted that certain classification and origin-related issues within the automotive sector are currently under review by U.S. Customs and Border Protection (CBP). Additionally, the April 2, 2025, executive order notes that further actions may be considered in the automotive sector. These potential actions are still under evaluation by U.S. authorities and may result in additional requirements or restrictions applicable to Mexican exports.
General Rules of Origin Under USMCA
Under the United States-Mexico-Canada Agreement (USMCA), a good is considered originating — and thus eligible for preferential tariff treatment — if it meets one of the following criteria:
- Wholly Obtained or Produced: The good is entirely obtained or produced within the territory of one or more of the USMCA parties.
- Produced Entirely From Originating Materials: The good is produced entirely in the territory of one or more of the parties exclusively from originating materials.
- Substantial Transformation: The good is produced in the territory of one or more of the parties using non-originating materials, provided that the good satisfies all applicable requirements of Annex 4-B (Product-Specific Rules of Origin).
- Regional Value Content (RVC): The good meets the regional value content requirement, calculated using either the transaction value method or the net cost method, as specified in Article 4.5 of the USMCA.
- De Minimis Provision: Non-originating materials used in the production of the good that do not undergo the required change in tariff classification are considered originating if their value does not exceed 10 percent of the transaction value or total cost of the good, provided the good meets all other applicable requirements.[2]
These general rules are designed to ensure that the benefits of the USMCA accrue to goods that have a significant economic connection to the territories of the member countries.
For the automotive sector, these include the Labor Value Content (LVC) requirement, which mandates that a certain percentage of a vehicle's value be produced by workers earning at least $16 USD per hour.
As of July 1, 2023:
- Passenger Vehicles: Must have 40 percent of their value from high-wage labor.
- Light and Heavy Trucks: Must have 45 percent of their value from high-wage labor.
These percentages are further broken down into:
- Material and Manufacturing Expenditures: 25 percent for passenger vehicles; 30 percent for trucks.
- Technology Expenditures: Up to 10 percent.
- Assembly Expenditures: Up to 5 percent.[3]
Possible Duty Mitigation Strategies
Companies can consider the following strategies to mitigate the impact of tariffs:
- Tariff Classification Review: Validate that HTS codes are accurate and reflect correct duty rates.
- Customs Valuation Adjustments:
- Use "First Sale for Export" valuation to base duty on first sale price offshore.
- Exclude non-dutiable elements such as buying commissions, freight or insurance.
- Unbundle and segregate royalties, license fees and service premiums from customs value.
- Assess if embedded trademark or sole-distribution rights can be compensated separately.
- Supply Chain Reengineering:
- Optimize supplier sourcing to leverage preferential partners.
- Utilize Foreign Trade Zones and bonded warehousing.
- Restructure to route through countries with preferential agreements.
Quantifying Impacts: model exposure by:
- Mapping all HTS codes used in imports.
- Applying corresponding ad valorem duty rates.
- Simulating scenarios (e.g., 25 percent non-originating vs. 0 percent USMCA-originating).
- Calculating landed cost differentials.
Mexican exporters must adapt to a shifting U.S. trade policy. It is important to assess compliance with origin and labor requirements under USMCA, review HTS classifications, and evaluate opportunities for customs valuation optimization. By leveraging tools such as FTZs, and First Sale for Export, companies can significantly mitigate duty exposure.
The Mexican government has not imposed any retaliatory tariffs; instead, it has focused on developing the “Plan Mexico,” which consists of a series of strategies aimed at strengthening the national industry.
A&M as a global advisory firm stands ready to support your organization in navigating this landscape, offering strategic guidance, risk assessments and tailored solutions to maintain competitive access to the U.S. market.
[1]“Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits,” The White House, Executive Orders, updated April 2, 2025, https://www.whitehouse.gov/presidential-actions/2025/04/regulating-imports-with-a-reciprocal-tariff-to-rectify-trade-practices-that-contribute-to-large-and-persistent-annual-united-states-goods-trade-deficits/
[2]Office of the United States Trade Representative, USMCA Chapter 4 – Rules of Origin, 2020, accessed April 24, 2025, https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/04-Rules-of-Origin.pdf
[3]U.S. Department of Commerce, International Trade Administration, USMCA Automotive Sector Report, 2020, accessed April 24, 2025, https://www.trade.gov/usmca-auto-report
