Tariff Turbulence: How Trump’s Mexico Tariffs Could Shift Gears in the U.S. Auto Market

Why Mexico Matters to American Automakers

The United States is the world’s largest car-importing country. It was by far the leading export destination for light vehicles made in Mexico, the world’s seventh-largest auto producer and fourth-largest vehicle exporter. Mexico’s auto plants are clustered in central Mexico in large complexes like Aguascalientes—which houses German, Japanese, and Korean automakers. Closer to the border, another cluster is in Nuevo León, where Hyundai-Kia is the largest producer, making mostly small sedans. Since 1986, Ford has operated in Sonora in northwestern Mexico where it produces compact SUVs such as the Bronco Sport and small pickup trucks such as the Maverick. (See figure 1.)

Figure 1. Mexico’s Auto Plants Exporting to the United States

In 2024, Mexico shipped about 2.8 million light vehicles to the United States, accounting for 80.2 percent of Mexico’s total light-vehicle exports. During that period, nearly half of Mexico’s car exports to the United States were produced by American automakers. Japanese brands made up about 32 percent, German brands slightly over 12 percent, and South Korean brands just above 6 percent. (See figure 2.)

Figure 2. About half of Mexican light-vehicles export to the United States are American brands

American Automakers Would Be Most Impacted by New Tariffs

The new tariffs on imports from Mexico will not hit all automakers equally. American giants like General Motors (GM) and Ford will feel the pinch more, considering the high-export intensity of their production in Mexico. In 2024, GM exported about 85 percent (some 712,000 vehicles) of its Mexican output to the U.S. market, while Ford exported 92 percent (358,000 vehicles) and Stellantis-Chrysler exported 77 percent (314,000 vehicles). Japanese automakers are unlikely to fare much better, with over half of all their Mexican production headed to the United States last year. Specifically, Nissan exported 53 percent of its Mexican-made vehicles to the United States (326,000 vehicles), Toyota 92 percent (228,000 vehicles), Honda 87 percent (211,000 vehicles), and Mazda 53 percent (113,000 vehicles). (See figure 3.)

Figure 3. Mexican Auto Production and Exports to the United States by Maker (thousands of units, 2024)

German automakers, however, could escape the worst of it. Their Mexican production is less dependent on the U.S. market compared with their American and Japanese peers. For example, Volkswagen exported 54 percent (287,000 vehicles) of its Mexican production to the United States last year, while BMW and Mercedes sent less than 40 percent (38,000 and 16,000 vehicles, respectively). (See figure 3.)

Hyundai-KIA, the only major South Korean automaker currently operating production plants in Mexico, could also face some challenges. Despite its smaller production volume compared to GM, Nissan, Volkswagen, Chrysler, and Ford, over 60 percent of Hyundai-KIA’s Mexican production was exported to the United States in 2024 (167,000 vehicles). (See figure 3.)

Altogether, American automakers produce more than 1,600,000 vehicles in Mexico, most of which are ultimately destined for the U.S. market. Vehicle production in Mexico has been expanding since bottoming out in 2021. GM and Ford have led the expansion into Mexico, increasing their local production by 75 percent and 52 percent respectively since 2021. By contrast, Stellantis-Chrysler has only increased its production by 5 percent over that same period.

Figure 4. Mexican Auto Production and By Home Country of Maker (millions of units, annual)