New Tariffs in U.S.-Mexico Trade: What’s Changing and Who Pays the Price?

Not a foreign trade professional here, but someone who has spent a lot of my personal and professional time straddling both sides of the border building fintech businesses and advising financial institutions interested in leveraging the unique relationship, and vast opportunities, of these two countries. Also not about to list the advantages of free, open trade; I'll look at the past 30 years since the inception of NAFTA (and some college textbooks), and assume the pros outweigh the cons.

Recent developments in U.S.-Mexico trade policy have been shaped by various geopolitical and economic factors. Recently, the Biden administration emphasized sustainable trade practices, workers' rights, and supply chain resilience in its 2024 Trade Policy Agenda. This included efforts to enforce existing trade agreements and create new ones with a focus on inclusive economic growth. Additionally, the shift towards "friendshoring" has seen increased imports from Mexico as companies seek to mitigate risks associated with U.S.-China trade tensions.

Mexico has solidified its position as the top trading partner of the United States. In the first four months of 2023, bilateral trade between the U.S. and Mexico reached $263 billion, surpassing trade with China and Canada. This trend is expected to continue as Mexico's manufacturing sector, particularly in automotive production, continues to expand. For instance, U.S. imports of vehicles from Mexico have significantly increased, contributing to the overall trade volume.

Total U.S.-Mexico Trade Volume, 2004–2023

Over the past three decades, U.S.-Mexico trade has evolved significantly. Key historical milestones include the implementation of NAFTA in 1994, which dramatically increased trade flows between the two countries. NAFTA was replaced by the USMCA in 2020, further refining trade relations and addressing modern trade challenges such as digital commerce and labor rights. The automotive industry has seen some of the largest changes. Mexico's role as a major auto manufacturer has grown, driven by investments from global automakers and the integration of North American supply chains. This growth has been coupled with increased production of electronics and other manufactured goods.

Estimated U.S. Imports from Mexico by Category (2023)

Needless to say, this binational relationship is a strategic one and continues to evolve, maybe as I type this; it has shaped everything from the cost of produce at the grocery store to the structure of North American supply chains, along with temporary work visas for citizens of all three countries. To understand what is to come, let's break down the latest policy changes, the types of goods affected, and what it all means for American households and industry.

Summary of the New Tariffs

As of mid-2025, the U.S. has enacted a series of tariffs targeting imports from Mexico in an effort to address trade imbalances, bolster domestic production, and counteract perceived circumvention of existing duties.

Key Tariff Measures:

• Steel and Aluminum: A 25% tariff on steel and 10% on aluminum, unless they meet North American origin standards (Reuters).

• Automobiles and Auto Parts: Up to 25% tariffs on vehicles and parts that don’t meet USMCA content thresholds (Wikipedia).

• Agricultural Products: A 17.09% tariff on tomatoes, impacting 70% of tomato imports from Mexico — with similar actions under consideration for other produce (Washington Post).

• Technology and Electronics: Tariffs ranging from 25% to 100% on semiconductors, EV batteries, and medical devices, aimed at reducing foreign dependency (Geodis).

• Consumer Goods: Tariffs of 5% to 50% on items like textiles, footwear, furniture, chemicals, and electronics (PwC).

How Much Is Affected?

• Total Value of Affected Imports: Approximately $18 billion worth of goods from Mexico are impacted by these tariffs (Geodis).

• Federal Revenue Impact: The tariffs are projected to increase tax revenue by $152.7 billion in 2025, marking the largest tax hike since 1993 (Tax Foundation).

What it could mean for the U.S. Consumer

1. Rising Prices: The tomato tariff alone is expected to increase prices by 10.5%, with similar effects anticipated for vehicles, electronics, and food items (AP News).

2. Shrinking Product Availability: Retailers and manufacturers may scale back inventory or production due to higher input costs, reducing variety for consumers.

3. Wider Inflationary Pressures: The breadth of goods affected — from groceries to medical equipment — could contribute to overall inflation and impact household budgets.

And for the U.S. Economy?

1. Disruption of North American Supply Chains: Industries like automotive and electronics that depend on integrated cross-border logistics may face production delays and cost overruns (Wikipedia).

2. Retaliatory Risks: Mexico has indicated it may respond with its own tariffs, including on U.S. meat exports, which could hurt American farmers and food processors (Washington Post).

3. Investor and Business Uncertainty: Sudden policy shifts undermine predictability, discouraging long-term capital investment and hiring.

Final Thoughts

I am finding it difficult to draw a clear line on these tariffs. On the one hand, I agree that we all have to defend our home; if tariffs incentivize more works for the citizens of my country, then why not? If this decision creates net new jobs in the economy and sparks a new age of U.S. manufacturing, why not? Tariffs are often promoted as a tool to protect domestic industries and correct trade imbalances, sure we all know that. But their real-world effects are rarely isolated. Aside from all these potential economic impacts, isn't a stable southern neighbor a matter of national security? Economic stability is key for Mexico to increase opportunity, income distribution, and social mobility... all prerequisites of a safer society in which there are no vulnerable sectors that can fall prey to criminal groups. I digress; it seems we all pay the price.