Moving Forward or Backward? Mexico Negotiates Lower Tariffs, but the US Wants Something More
- As Mexico seeks tariff relief, Washington’s demands raise questions about the future of factories and their supply chains.
Negotiations to reduce US tariffs on Mexican steel, aluminum, and automobiles are continuing, but accounts of their progress differ. While The Wall Street Journal reports that US Commerce Secretary Howard Lutnick is resisting substantial tariff reductions, the Mexican government says talks are moving forward and rejects claims they have stalled.
Behind these differences is a negotiation that goes beyond tariff rates. Mexico seeks to lower the US tariff on its automobiles from 25% to 15% or less to prevent them from competing at a disadvantage against vehicles from Japan and South Korea, which have already secured that rate, as well as reduce the 50% tariffs on steel and aluminum. The United States, meanwhile, is seeking to use the negotiations to demand a greater role for its industry in manufacturing vehicles exported from Mexico, according to media reports.
Among the reported US demands is raising the regional content requirement for vehicles to comply with USMCA rules of origin from 75% to about 82%, along with a requirement that roughly half of their components come from the United States. The proposals would change the conditions that currently let manufacturers benefit from the agreement, although no deal has been reached on adopting them.
So far, negotiations remain open, but Mexico has already secured tariff exemptions for a substantial share of its exports. According to Economy Secretary Marcelo Ebrard, between 82% and 85% of what the country sells to the United States enters without paying US tariffs, an outcome he attributed in part to Lutnick and US Trade Representative Jamieson Greer. In that context, after appearing before joint committees of Mexico’s Chamber of Deputies on October 16, Ebrard said he had never perceived “an attitude against Mexico” from Lutnick, whom he described as “a good friend.”
Mexico’s Share of US Imports
Mexico’s tariff exemptions do not cover every sector, and some still subject to high duties account for a significant share of the US market. In fact, Mexico maintained virtually the same share of US vehicle and parts imports, accounting for 37.2% of their total value between January and August 2026, even as purchases from Mexico fell 3.9% year over year, according to US Census Bureau data analyzed by SiiLA. The trend was less uniform for metals. Mexico lost nearly two percentage points of market share in iron and steel, falling to 7.5% of US imports, but gained ground in articles of iron and steel, reaching 15.6%, as well as in aluminum and articles thereof, with a 7.2% share.
These figures show that Mexico has not lost general market share to other foreign suppliers in sectors of major commercial importance. Nevertheless, uncertainty remains about the conditions under which it can maintain that position, as the outcome of the negotiations could change both export costs and supply chain organization. This is because a tariff reduction would lower the cost of bringing Mexican products into the United States without necessarily requiring changes to how they are manufactured. By contrast, stricter US content requirements could push companies to switch suppliers and reorganize production to secure more favorable treatment.
Tariff Negotiations and Mexico’s Industrial Real Estate Market
These negotiations matter for the industrial real estate market beyond the space occupied by the industries involved. According to SiiLA, automotive companies currently account for approximately 26% of Mexico’s occupied industrial space, while mining, metallurgy and steel account for another 3%. Together, these industries comprise 1,008 companies whose production processes depend to varying degrees on foreign inputs. In the automotive sector, for example, Mexico imports approximately 80 cents worth of auto parts for every dollar it exports, according to a previous SiiLA analysis. Meanwhile, CANACERO estimates that steel produced in Mexico contains 12% US inputs. This integration means that the trade terms ultimately agreed upon could affect industrial operations already established in Mexico, even if companies do not relocate their facilities.
For now, the Mexican government still expects progress before the end of 2026, although it has not announced any agreement on tariff reductions. The talks coincide with the USMCA review process, whose outcome could establish broader trade conditions for industries in both countries.
Learn more about Mexico’s industrial real estate market. Visit SiiLA Market Analytics or email us at contacto@siila.com.mx.
