Suggested Citation:
Pares, Francisco, Aditya Ramji, Roland Hwang, Juan Carlos Garcia Sanchez (2025)

Navigating US Tariff Risks: Mexico’s Industrial Policy for Electric Vehicles 

North America’s automotive industry is at a turning point, reshaped by the electric vehicle (EV) transition, post-pandemic supply chain shifts, and rising US protectionism. Mexico, as the largest vehicle supplier to the US, with a 15 per cent market share, is deeply embedded in these changes.83 However, this success comes with a major vulnerability—Mexico’s overwhelming dependence on US markets and automakers.  In 2024, US automakers accounted for 42 per cent of Mexico’s light-duty vehicle (LDV) production, and nearly 70 per cent of total output was exported to the US, while only 12 per cent remained for domestic consumption (see Table 1).84 At the same time, nearly 65 per cent of LDVs sold within Mexico were imported—mainly from China, the US, Brazil, and India. Although the auto sector contributes 5 per cent to Mexico’s GDP and attracts 20 per cent of foreign direct investment, its high exposure to external markets leaves it vulnerable to global policy shifts. A proposed 25 per cent US tariff on Mexican auto imports now threatens to destabilize this export-driven model, putting market share and future investment at risk.