Mexico's Effective Tariff Rate at 4.7% Thanks to USMCA
Mexico's Role Grows as an Alternative to China in U.S. Trade Deficit
"Level of Integration Too High to Terminate"
An analysis has emerged that the unexpected winner in the tariff war launched this year by U.S. President Donald Trump against the world is Mexico. According to Yonhap News on the 26th (local time), citing the Wall Street Journal (WSJ), "Thanks to the United States-Mexico-Canada Agreement (USMCA), the actual tariff rate imposed on Mexican goods has remained relatively lower than that of competing countries. As Mexican products have partially replaced Chinese goods targeted by high U.S. tariffs, Mexico's exports to the United States have actually increased."
An analysis has emerged that the unexpected winner in the tariff war launched this year by U.S. President Donald Trump against the world is Mexico. Photo by Reuters and Yonhap News Agency
According to the Mexican government, Mexico's exports of manufactured goods to the United States from January to November this year increased by about 9% compared to the same period last year. During this period, Mexico's automobile exports to the United States decreased by about 6%, but other manufacturing exports surged by 17%. The trade volume between the United States and Mexico this year is expected to reach 900 billion dollars (about 1,300 trillion won), setting a new all-time high.
President Trump imposed a so-called "fentanyl tariff" of 25% on all Mexican products this year, claiming that Mexico was passive in controlling the inflow of narcotics into the United States. He also introduced item-specific tariffs, imposing 25% and 50% tariffs on automobiles, auto parts, steel, and aluminum products, regardless of the country of origin. Although Mexico's export environment worsened as a result, the North American free trade agreement, USMCA, is seen as having played a significant role in mitigating the tariff shock to Mexico's economy.
The United States, considering the potential impact on its own economy, exempts most tariffs on goods imported from Mexico and Canada if they meet USMCA requirements, given the high level of economic integration. As a result, about 85% of Mexico's total exports remain tariff-free. According to the Wharton School at the University of Pennsylvania, the effective tariff rate on Mexico's exports to the United States is 4.7%, significantly lower than that of China (37.1%), a major competitor in U.S. exports, and less than half the global average effective tariff rate (10%).
The WSJ analyzed, "Producers seeking to enter the U.S. market say that Mexico retains unique advantages such as accessibility to the United States, a low-cost manufacturing base, and a still-existing, though somewhat weakened, free trade agreement, just as it did before the era of tariffs."
The Trump administration ultimately did not impose country-specific reciprocal tariffs on Mexico under the International Emergency Economic Powers Act (IEEPA), unlike with other major U.S. trade deficit countries such as South Korea, Japan, and the European Union (EU). There is also analysis that Mexico is regarded as a strategic partner to reduce excessive dependence on China, which is another reason why Mexico's effective tariff rate remains low.
In mid-December, Jamieson Greer, a representative of the United States Trade Representative (USTR), stated in Congress, "We are reducing the trade deficit with China by increasing imports from Mexico," and "Mexico is playing an important role in the United States' efforts to restore its supply chain." In other words, even if the United States runs a trade deficit with Mexico, it is preferable to running a trade deficit with China.
The United States is set to conduct a regular review of the USMCA in 2026. However, Luis de la Calle, a Mexican negotiator who participated in the USMCA talks, told the WSJ, "Given the high level of integration, the cost for the United States to terminate the USMCA would be enormous."
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