𝗠𝗘𝗫𝗜𝗖𝗢 𝗖𝗟𝗢𝗦𝗜𝗡𝗚 𝗙𝗔𝗖𝗧𝗢𝗥𝗜𝗘𝗦, 𝗟𝗔𝗬𝗜𝗡𝗚 𝗢𝗙𝗙 𝗪𝗢𝗥𝗞𝗘𝗥𝗦 𝗜𝗡 𝗔𝗡𝗧𝗜𝗖𝗜𝗣𝗔𝗧𝗜𝗢𝗡 𝗢𝗙 𝗧𝗥𝗨𝗠𝗣 𝗔𝗗𝗗𝗜𝗡𝗚 𝗧𝗔𝗥𝗜𝗙𝗙𝗦

 

The Mexican manufacturing sector is increasingly alarmed by the possibility of renewed protectionist policies implemented by Donald Trump. 

A key concern is the threat of higher tariffs on Mexican goods entering the United States, a move that could significantly impact Mexico’s export-dependent economy. According to a July 25 report from The Texas Tribune, these concerns have grown since the Trump administration briefly imposed a 25% tariff in March, though an exemption was later granted for goods compliant with the U.S.-Mexico-Canada Agreement (USMCA). President Claudia Sheinbaum of Mexico has been in negotiations with the Trump administration in hopes of delaying any further tariffs.

The potential consequences of new tariffs are already reverberating through Mexico’s manufacturing hubs. Industry leaders fear production slowdowns, factory closures, and even job losses if U.S. consumers turn away from more expensive Mexican products. This would hit especially hard in regions like Juarez, where roughly 150 factories supply parts to U.S. automakers. Some production lines have already been shut down due to tariffs on goods not covered by USMCA, leading to layoffs and forcing companies to relocate operations, sometimes back to the U.S.

The economic implications are wide-ranging. Exports to the U.S. made up nearly 30% of Mexico’s GDP in 2024, amounting to $495 billion. A sustained 25% tariff could trigger a sharp drop in exports and potentially cause an economic contraction, analysts warn. The tariff threat is also casting doubt over Mexico’s recent nearshoring gains, as companies that moved production closer to the U.S. may now rethink those strategies.

Adding to the uncertainty is the upcoming 2026 USMCA review. Commerce Secretary Howard Lutnick confirmed that Trump plans to renegotiate the trade agreement, arguing that it favors American jobs. “He doesn’t want cars built in Canada or Mexico when they could be built in Michigan and Ohio,” Lutnick said. This announcement has rattled investors and border communities that have relied on free trade for decades.

Meanwhile, some fear the renegotiation could stretch beyond trade issues. Border industry leaders say Trump may try to tie the agreement to his efforts to curb illegal immigration and fight fentanyl trafficking, topics they believe should remain separate. “The trade community shouldn’t be held hostage to issues it doesn’t control,” said Jerry Pacheco of the Border Industrial Association.

There are also concerns about competition from Chinese companies that use Mexico as a backdoor into the U.S. market. Pacheco suggests that the three USMCA countries should cooperate to limit these companies' access to the benefits of the trade pact.

Within Mexico, business leaders are frustrated by what they see as a lack of decisive government action. Thor Salayandia, president of the Border Entrepreneurial Bloc, said Juarez has seen no new industrial parks or major investments in recent months, despite a brief period of stability. Over the past two years, the city has lost around 500 small businesses and laid off nearly 60,000 workers, a trend driven by rising labor costs and weakening investor confidence.

Judicial reform in Mexico has only deepened investor concerns, with some international firms downgrading their outlook on the country due to fears over judicial independence. Security problems, including widespread organized crime and violence, further complicate the investment landscape.

Back across the border, uncertainty is stalling growth. In New Mexico, several companies have postponed or canceled plans due to the unpredictability of tariffs. One firm faced a $75,000 increase in costs per unit due to new duties on steel and aluminum. Although a few businesses, such as a German manufacturer of aircraft and auto parts, are still moving in, most are waiting for clarity.

For now, both investors and manufacturers remain cautious, with many watching closely to see how U.S. trade policy evolves in the coming months. The threat of tariffs, coupled with broader concerns over trade agreements, governance, and security, has left Mexico’s manufacturing sector in a state of uneasy limbo.