“Liberation Day”
Tariffs are much more than mere trade policies – they represent a complex web of effects that impact global economies, businesses, and consumers. From a legal and tax advisory perspective, understanding how these trade policies affect nations is crucial, particularly in the case of Mexico. Over the past few years, Mexico has witnessed the evolution of tariff policies under the U.S. administration, a process that has created both uncertainty and opportunities. In the following article, we examine the effects of tariffs in the Mexican context, considering the perspectives of key players such as government agencies, economic experts, and the implications for strategic sectors of the economy.
According to David Kelly, strategist at J.P. Morgan, tariffs are problematic because they raise prices, slow economic growth, reduce profits, and can lead to higher unemployment. He adds, “Tariffs increase inequality, reduce productivity, and escalate global tensions.” These global effects are undeniable, but in the specific case of Mexico, it is important to consider the opportunities that arise amidst these challenges.
Mexico, as one of the U.S.’s key trade partners, is strategically positioned to take advantage of the trade tensions created by tariffs. Sectors such as electronics, automobiles, and steel could see positive impacts if U.S. consumers and businesses opt for more competitively priced Mexican products, which are more affordable compared to tariffs on goods from other countries.
The term “Liberation Day,” which has gained significance in recent months, refers to Mexico’s situation with respect to the tariffs imposed by the U.S. While countries like China and the European Union have been severely impacted by Donald Trump’s protectionist policies, Mexico has largely managed to remain exempt from many of these tariff measures. According to Édgar Amador Zamora, head of the Ministry of Finance (SHCP), the non-imposition of tariffs on Mexican products by the U.S. is a clear sign of a “preferential treatment” and an indication that there are better economic conditions and investment opportunities in Mexico.
This tariff exemption extends to products included under the USMCA (T-MEC), meaning that key sectors such as agriculture, electronics, and Mexican manufacturing will not be severely affected by Trump’s new tariff measures. This exemption places Mexico in a favorable position compared to other countries facing much higher tariffs. Under the leadership of President Claudia Sheinbaum, Mexico aims to negotiate a preferential deal that would allow the country to maintain lower tariffs than other regions, such as the 20% imposed by the European Union or the 34% that China has imposed on U.S. products.
Mexico remains a key production hub for many international automakers, allowing companies like Nissan to continue exporting vehicles to the U.S. without facing the same trade barriers as manufacturers from other countries. In fact, 85% of what Nissan sells locally is produced in Mexico, underscoring the strategic importance of the country’s manufacturing facilities for automakers.
However, the impact of tariffs is not uniform. German companies like Volkswagen, which have a strong presence in Mexico, face additional challenges as they do not meet the USMCA’s requirement to produce a certain percentage of components from the region. This forces them to make larger investments in the region or seek alternative solutions, such as sourcing more components from the U.S., which could increase their production costs.
The implementation of tariffs by the U.S. has created both challenges and opportunities for Mexico. From a legal and tax perspective, “Liberation Day” has enabled Mexico to maintain its competitiveness compared to other countries affected by tariffs, despite ongoing uncertainty about the future direction of global trade policies. As the USMCA continues to evolve and key industries like the automotive sector adapt to new challenges, Mexico must leverage its strategic position to establish itself as a preferred trading partner in North America. However, the risk of a global recession remains, and Mexican authorities must continue to closely monitor international trade policies to mitigate any potential negative impacts.
