MEXICO CITY – If enacted, President-elect Trump’s threatened tariffs on Mexico and Canada will bite deep and well in the Texan border area.
Take the Toyota Tundra pickup truck and the Sequoia SUV, for example. Both are assembled at Toyota’s San Antonio, Texas plant, but rely heavily on several key components sourced from Mexico. These include axles, engines, transmissions, powertrains, and other key auto parts that are produced at the Japanese car maker’s Baja California and Guanajuato plants, in northern and central México.
Or, the Chevrolet Silverado pickup, assembled at General Motor’s Flint, Michigan plant with key components, including engines manufactured at GM facilities in northern and central Mexico. Additionally, many of the Silverado brake parts are supplied by manufacturers such as Bosch and Michigan-based ZF Group, which operate plants in Mexican cities like Aguascalientes, Ciudad Juárez, Reynosa and Querétaro.
This cross-border integration illustrates why imposing a 25% tariff on all imports from Mexico or Canada, which also is a crucial supplier of US auto assembly plants, would carry substantial costs. The tariffs would not only increase the expenses of producing vehicles, like the Tundra Sequoia and Silverado, but would also likely raise prices for consumers in the U.S. Ironically, this would harm the very economy the Trump tariffs are intended to protect.
“The impact of tariffs would be like shooting yourself on the foot,” said Julio Chiu, former chairman of the El Paso-based Borderplex Alliance and longtime Ciudad Juarez business leader. “Tariffs are going to come back to bite you, and it’s going to be inflationary and if people say, ‘no, it’s not,’ they don’t know anything about economics.”
Additionally, many of Toyota's two Toyota vehicles auto parts are supplied by manufacturers such as Takumi and Nemak, which operate plants in Mexican cities like Aguascalientes and Monterrey.
If Mexico and Canada retaliate —as they are entitled to under the USMCA (the trade agreement that replaced the North American Free Trade Agreement, or NAFTA, under Trump’s first term)— the repercussions for North America’s auto industry could be catastrophic. Auto parts produced in the region often cross borders up to four or more times before reaching assembly plants in the US, Canada or México. Each border crossing would face Trump’s proposed tariffs or retaliatory tariffs from Mexico and Canada, compounding costs and disruptions.
“A 25% tariff on Canada and Mexico, at the same time, will just simply finish the U.S. economy”, said Marcelo Ebrard, México’s Economy Minister in a recent interview in the YouTube program Los Periodistas, conducted by journalists Álvaro Delgado y Alejandro Paez Valera.
This trade dance highlights the deep integration of the North American auto industry. It also fuels confidence among Mexican government officials and business leaders that Trump’s threat can be overcome as the damage would be felt not just by U.S. companies and consumers, but even by the same administration that initiated the trade dispute.
Furthermore, higher costs would make North American-made cars uncompetitive, not just within the region, but globally, probably leading to unemployment and inflation across the three countries.
“The whole point of NAFTA and the USMCA is to form a North American trade bloc where we integrate our economies to become globally competitive as a trade bloc”, said Jerry Pacheco, president of the Border Industrial Association in Santa Teresa, New Mexico, across the state line from El Paso.
Trade experts argue that once the incoming U.S. administration fully grasps the complexity and depth of regional automotive supply chains, it may reconsider. These interconnections extend beyond vehicles to engines, braking systems, wheels, dashboards, wiring harnesses and other components.
“Perhaps they haven’t fully analyzed what Mexico represents in the supply chain—not just for the automotive industry but for many others,” said Beatriz Leycegui, a partner at consulting firm SAI Derecho & Economía. “When Trump takes a closer look at how production chains are integrated, he’ll realize that imposing broad tariffs on trade is not as simple as it seems.”
Currently, 87% of Mexican-made auto components are exported to U.S. factories, while half of the auto parts imported into Mexico originate from the U.S., according to the International Trade Administration at the U.S. Department of Commerce. These intricate links, forged over three decades of free trade among the U.S., Mexico, and Canada, risk severe disarray from Trump’s tariffs, kicking apart the entire supply chain that North America has painstakingly developed.
Mexican President Claudia Sheinbaum, who took office on July 1, winning by an overwhelming majority, initially signaled a willingness to avoid a trade war with the U.S. The day after Trump announced his tariff proposal on his social network Truth Social, Sheinbaum, who has more than five years remaining in her term, expressed readiness to address his concerns about migrants and drug trafficking –issues he cited as justification for the tariffs threat. However, she made it clear that Mexico would retaliate against any sanctions on its exports.
“I’m convinced that the economic strength of North America lies in preserving our trade partnership,” Sheinbaum wrote Trump and his aides in a missive. “This approach allows us to remain competitive against other economic blocs. I believe dialogue is the best path to mutual understanding, peace, and prosperity for our countries. I look forward to our teams meeting soon.”
Days later, the two leaders spoke by phone, reportedly seeming to have reached a compromise to avert the trade crisis, for now.
If the U.S. proceeds with the tariffs and Mexico retaliates, the impact will extend far beyond the automotive sector. Mexico is a key market for U.S. grain and manufactured goods, which would also face retaliatory taxation upon entering Mexico. This would harm significant segments of U.S. producers –many of whom are Trump supporters—potentially turning them against him for jeopardizing their businesses.
Mexico is the U.S.’s largest trading partner, with projections indicating that it will import $326 billion in U.S. goods this year, while exporting $489 billion worth of goods to American consumers.
In Texas' case, the state will end up importing about $155 billion of Mexican-made goods at the end of this year, while it will export close to $132 billion, according to the International Trade Administration. No other state in the U.S. trades more with Mexico than Texas.
Trump’s tariff and Mexican reprisals could add at least $203 billion in costs overall, while $71.8 just in Texas, sums that will likely be borne by companies and consumers on both sides of the border. Many experts warn that these threats could backfire.
“Imposing the tariffs Trump is threatening against Mexico and Canada means punishing American consumers, reducing U.S. competitiveness, and driving up inflation,” wrote Kenneth Smith Ramos, a former Mexican trade negotiator, on the social media platform X. “Trump’s bet is risky for the U.S. economy, which heavily depends on Canadian and Mexican markets for exports, as well as on inputs from Mexico and Canada for industrial production. It’s a #ShotInTheFoot.”
Notably, these tariffs are not aimed at addressing unfair trade practices by México or Canada. Instead, Trump cited the alleged failure of both countries to curb the flow of migrants and narcotics into the U.S.
“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all illegal Aliens stop this invasion of our Country!”, Trump declared in his post on Truth Social, when he launched his first salvo. “Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem. We hereby demand that they use this power.”
In her letter, Sheinbaum sought to assure Trump’s administration that Mexico was actively addressing these concerns. She highlighted measures to control migration through Mexican territory and emphasized Mexico’s commitment to combating narcotics trafficking, in particular the fentanyl epidemic in the U.S.
“Mexico has implemented a comprehensive policy to assist migrants passing through our territory towards the southern U.S. border,” she wrote. “As a result, migrant caravans are no longer reaching the border. . . Additionally, we have expressed Mexico’s full commitment to combating the fentanyl epidemic in the United States.”
Ultimately, the implications of Trump’s proposed tariffs go beyond trade figures. They threaten to unravel decades of regional integration, increase costs for businesses and consumers, and damage the economies of all three nations in the North American bloc.
“No one country can claim ‘Made in the United States, or made in Mexico,” said Chiu, the businessman who specializes in manufacturing medical devices made from components assembled from the U.S. and México. “We all put things together from somewhere else.”
Editor’s note: This story was published in collaboration with the Puente News Collaborative, a bilingual nonprofit newsroom, convener and funder dedicated to high quality, fact-based news and information from the U.S.-Mexico border. Story Edited by Dudley Althaus
KTEP News is a Puente News Collaborative partner.
