Automotive and Home Appliance Sectors Hit Hard! The Story Behind Mexico’s Targeted Tariff Hikes

Since 2025, Mexico’s trade policy adjustments have continued to target China’s automotive and home appliance industries—first imposing an additional tariff of up to 50% on automobiles imported from non-FTA (Free Trade Agreement) countries, then raising the import tax rate for home appliances from 19% to 33.5%. These moves have directly pushed both sectors into the “crosshairs” of tariff hikes. Data shows that in the first half of 2025, China’s automobile exports to Mexico fell by 18% year-on-year, while home appliance export value decreased by $2.2 billion. Countless enterprises now face the dilemma of “soaring costs and lost orders.” Why has Mexico specifically targeted the automotive and home appliance industries for tariff hikes? What economic logic lies behind this policy? And how can enterprises break through this predicament? This article will unpack the full picture of this trade policy adjustment layer by layer.

I. Implementation of Tariff Hikes: A “Double Blow” to the Automotive and Home Appliance Industries

Mexico’s tariff hikes on automobiles and home appliances are not standalone policies, but a combination of “tariff rate increases + tighter rules of origin + import quota restrictions” to achieve precise regulation of the two sectors. There are significant differences in policy details and impact severity.

1. Automotive Industry: Tariffs Doubled + Quota Controls, Export Barriers Soar

In March 2025, Mexico’s Ministry of Economy released the Automotive Industry Import Tariff Adjustment Act, with three core provisions:

• Sharp Tariff Increases: For light vehicles (displacement ≤ 2.0L) imported from non-FTA countries, tariffs rose from 15% to 30%; for medium-sized vehicles (displacement 2.0–3.0L), from 20% to 40%; and for heavy-duty vehicles and new energy vehicles (NEVs), from 25% to 50%. Additionally, the previous “tiered tariff increase for annual imports exceeding 100,000 units” clause was abolished, with the maximum rate applied directly.
• Tighter Rules of Origin: Imported vehicles must meet the “North American regional value content ≥ 75%” requirement to qualify for tariff preferences, up from the previous 60%. Due to China’s heavy reliance on domestic production for core auto components (e.g., batteries, chips), the regional value content of Chinese automobiles typically ranges only from 30% to 40%, making them almost ineligible for preferences and effectively subjecting them to the highest tariff rates across the board.
• Import Quota Restrictions: Annual quotas were imposed on automobile imports from non-FTA countries, totaling 500,000 units in 2025—30% less than in 2024. Among these, the quota for NEVs was only 100,000 units, half of 2024’s figure.

The impact of this policy on China’s automobile exports was immediate. From January to June 2025, China’s automobile exports to Mexico dropped from 177,000 units in the same period of 2024 to 145,000 units, a decrease of 18%. Export value fell from \(3.5 billion to \)3.2 billion; excluding price increases (some enterprises raised prices to offset tariffs), the actual decline in export volume exceeded 25%. Take BYD as an example: the tariff cost for its best-selling Yuan PLUS (a light electric vehicle) in Mexico rose from \(3,000 to \)7,500 per unit, forcing its selling price to increase from \(28,000 to \)35,000. Consequently, its market share fell from 8% to 5%.

2. Home Appliance Industry: Tariff Jumps + Surcharge Overlays, Profit Margins Squeezed

In May 2025, Mexico’s Ministry of Finance adopted the Home Appliance Import Tax Adjustment Resolution, implementing a “base tariff increase + peak season surcharge” policy for core home appliance categories such as air conditioners, refrigerators, and washing machines:

• Base Tariff Increases: Import tariffs for large home appliances like air conditioners and refrigerators rose from 19% to 33.5%; for small appliances like microwaves and rice cookers, from 15% to 28%. These categories account for 80% of China’s home appliance exports to Mexico.
• Peak Season Surcharges: From November to February (Mexico’s home appliance sales peak season, including Christmas and New Year promotions), an additional 10% “peak season surcharge” was levied on imported home appliances, with no overlap with other preferential policies.
• Enhanced Compliance Requirements: Imported home appliances now require additional “energy efficiency certifications + environmentally friendly material test reports,” with each report costing approximately $800 to prepare. The review cycle extended from 7 days to 15 days, with a delay rate exceeding 30%.

After the policy took effect, export costs for Chinese home appliance enterprises increased significantly. Take a 1,000 USD air conditioner exported to Mexico: in 2024, the tariff cost was 190 USD; in 2025’s peak season, the combined tariff and surcharge reached 435 USD, a cost increase of 129%. In the second quarter of 2025, China’s air conditioner exports to Mexico fell by 32% year-on-year, and refrigerator exports dropped by 28%. Some small and medium-sized (SME) home appliance enterprises, unable to bear the cost pressure, suspended their Mexican operations and shifted to Southeast Asian markets.

II. The Logic Behind Tariff Hikes: Dual Goals of Protecting Domestic Industries and Balancing Trade

Mexico’s decision to target the automotive and home appliance industries for tariff hikes is no coincidence. It is a key step in its economic strategy adjustment, driven by three core objectives: “protecting the upgrading of domestic manufacturing,” “alleviating trade deficits,” and “aligning with North American industrial chain integration.”

1. Protecting Domestic Industries: Promoting “Independenc” in Automotive and Home Appliance Manufacturing

In recent years, while Mexico has become a hotspot for global industrial relocation due to its “proximity to the U.S. market + low labor costs,” its domestic industrial chains in the automotive and home appliance sectors still have obvious weaknesses. In the automotive sector, local enterprises are mostly concentrated in assembly, with heavy reliance on imports for core components (e.g., batteries, engines). In home appliances, local brands hold less than 30% of the market share, and mid-to-high-end products are almost monopolized by Chinese and South Korean enterprises.

The Mexican government aims to use tariff hikes to buy time and space for the development of domestic industries. In the automotive sector, for instance, Mexico’s Ministry of Economy explicitly stated in its policy interpretation that tariff hikes are intended to “encourage multinational automakers to establish complete industrial chains in Mexico and promote local enterprises’ participation in core component production.” In 2025, Mexico launched supporting policies: enterprises investing in battery factories in Mexico receive a 15% tax reduction; local automotive component producers get a $200 per ton subsidy.

Data shows the policy has initially triggered an “industrial relocation effect”: in the first half of 2025, Tesla and Ford announced additional investments in Mexico to build battery and component factories. In home appliances, Mexico’s local brand Mabe partnered with Chinese enterprises to establish a washing machine motor production line in Mexico, increasing local component procurement rates from 40% to 60%.

2. Alleviating Trade Deficits: Reducing Dependence on Chinese Automotive and Home Appliance Imports

Mexico has long run trade deficits with China in the automotive and home appliance sectors, and the gap continues to widen. In 2024, Mexico’s trade deficit with China in automobiles reached \(8.5 billion, and in home appliances \)6.2 billion. The combined deficit of these two sectors accounted for 45% of Mexico’s total trade deficit with China. From Mexico’s perspective, restricting imports through tariff hikes is a direct way to ease the deficit.

According to data from Mexico’s National Institute of Statistics and Geography, from January to June 2025, the total export value of Chinese automobiles and home appliances to Mexico decreased by $3.8 billion, and Mexico’s trade deficit with China fell by 12% year-on-year—showing initial policy effects. Meanwhile, Mexico actively promotes an “import substitution” program to encourage local enterprises to expand production: in the first half of 2025, Mexico’s domestic automobile production increased by 10% year-on-year, and home appliance production rose by 8%, partially replacing the market share of Chinese imports.

3. Aligning with North American Industrial Chains: Connecting to the USMCA and Integrating into the North American Market

As a member of the United States-Mexico-Canada Agreement (USMCA), Mexico’s trade policies must align to some extent with those of the U.S. and Canada. In recent years, the U.S. has continuously pressured Mexico to “reduce dependence on Chinese industrial chains and integrate into the North American regional supply chain”—and automobiles and home appliances are core sectors in North American industrial chain integration.

The USMCA explicitly stipulates that automotive and home appliance products meeting “North American regional value content” requirements qualify for duty-free treatment among the three countries. By raising tariffs, Mexico is forcing Chinese enterprises to either localize production in Mexico (to increase regional value content) or exit the Mexican market—making room for North American domestic enterprises. For example, U.S.-based General Motors has reached an agreement with the Mexican government to relocate production of some Chinese-made auto components to factories on the Mexico-U.S. border, ensuring compliance with USMCA rules and eligibility for duty-free treatment.

III. Impact on Chinese Enterprises and Responses: From “Passive Pressure” to “Proactive Breakthrough”

Faced with Mexico’s tariff hikes, Chinese automotive and home appliance enterprises have encountered short-term shocks, but are also exploring new development paths through strategies such as “localized production,” “product upgrading,” and “market diversification.” Some enterprises have even shifted from “passive pressure” to “proactive breakthroughs.”

1. Impact: Soaring Costs, Lost Orders, and SMEs Under the Greatest Pressure

The impact of tariff hikes on Chinese enterprises is primarily reflected in three areas:

• Sharp Cost Increases: In the automotive sector, for example, after tariff hikes, the average cost of exporting a NEV to Mexico increased by $12,000 per unit, pushing some enterprises’ profit margins from 15% to below 5%. In home appliances, the share of comprehensive costs (tariffs + surcharges + compliance costs) rose from 20% to 35%, with some low-margin products (e.g., small appliances) falling into losses.
• Severe Order Losses: In the first half of 2025, orders for Chinese automotive enterprises in Mexico fell by 22% year-on-year, with NEV orders dropping by 30%. Among lost orders for home appliance enterprises, 60% were seized by South Korea’s Samsung, LG, and Mexican local enterprises.
• Survival Difficulties for SMEs: Large enterprises can offset costs through economies of scale and localized layouts, but SMEs—with limited funds and weak bargaining power—are the hardest hit. In the first half of 2025, 15% of Chinese SME home appliance enterprises withdrew from the Mexican market, and the closure rate of auto component enterprises reached 10%.

2. Response Strategy 1: Localized Production to Integrate into Mexico’s Industrial Chain

“Building factories in Mexico” has become the mainstream choice for large enterprises. By localizing production to meet rules of origin, they can avoid high tariffs. In 2025, BYD announced plans to build a NEV factory in Monterrey, a border city in northern Mexico, with an investment of $1.5 billion. Scheduled to start production in 2027, the factory will achieve an 80% local component procurement rate, meeting USMCA origin requirements and reducing tariff costs from 50% to 0.

Home appliance enterprises are also accelerating localized layouts: Haier expanded its refrigerator factory in Mexico, adding 500,000 units of annual capacity. Locally produced refrigerators qualify for tariff preferences, with prices 15% lower than imported products. Midea partnered with Mexican local enterprises to build an air conditioner compressor production line in Mexico, reducing dependence on Chinese-imported components and cutting comprehensive costs by 20%.

3. Response Strategy 2: Product Upgrading to Target High-Value-Added Markets

Facing cost pressures in the mid-to-low-end market, some enterprises are choosing to “move upmarket”—upgrading products to enter Mexico’s high-value-added market, using higher profits to offset high tariffs. In the automotive sector, NEV manufacturers such as NIO and Li Auto have introduced high-end models (priced above $50,000) to Mexico. Although tariff costs are high, profit margins for high-value-added products can exceed 20%, maintaining competitiveness. In the first half of 2025, sales of Chinese high-end NEVs in Mexico grew by 40% year-on-year, with market share rising from 5% to 8%.

In home appliances, Gree and Midea launched “smart home appliance packages” (with IoT functionality and energy-saving technology), priced 30% higher than ordinary products. However, as they qualify for Mexico’s “energy efficiency subsidy policy” (10% government subsidies for energy-saving home appliance purchases), they remain popular with consumers. In the second quarter of 2025, sales of Chinese smart home appliances in Mexico increased by 25% year-on-year, becoming a new driver of export growth.

4. Response Strategy 3: Market Diversification to Reduce Dependence on Mexico

To diversify risks, enterprises are accelerating the development of other overseas markets to reduce reliance on Mexico. In the automotive sector, Chinese automakers are turning to South America (Brazil, Argentina) and the Middle East (Saudi Arabia, the UAE). In the first half of 2025, China’s automobile exports to Brazil grew by 35% year-on-year, and to Saudi Arabia by 50%. In home appliances, enterprises are increasing investment in Southeast Asian and African markets: Haier built a new washing machine factory in Indonesia, and Midea established a home appliance distribution center in Nigeria—using market diversification to offset risks in Mexico.

IV. Future Outlook: A “New Balance” in China-Mexico Automotive and Home Appliance Trade

Mexico’s tariff hikes on automobiles and home appliances will cause short-term pain for China-Mexico trade, but in the long run, they will also promote in-depth integration of China-Mexico industrial chains and form a new trade balance.

From a policy perspective, Mexico’s tariff hikes are not “one-size-fits-all”—they retain “policy adjustment room.” If Chinese enterprises increase localized investment in Mexico or Mexico’s domestic industries achieve breakthroughs, tariffs may gradually be reduced in the future. For example, Mexico’s Ministry of Economy stated, “If Mexico’s domestic auto component self-sufficiency rate reaches 80% by 2026, we will consider reducing automobile import tariffs by 10–15%.”

From an enterprise layout perspective, “cooperation outweighs competition” in China-Mexico automotive and home appliance sectors. Localized production by Chinese enterprises will not only drive employment and industrial upgrading in Mexico but also allow Chinese enterprises to leverage Mexico’s geographical advantages to enter the North American market. For instance, after BYD’s Mexican factory starts production, it plans to export 30% of its output to the U.S. and Canada, enjoying USMCA duty-free treatment and achieving the strategic goal of “using Mexico as a bridge to enter North America.”

From a market demand perspective, Mexico’s automotive and home appliance markets still have significant growth potential. In 2025, Mexico’s automobile sales are expected to reach 1.8 million units, and home appliance sales to grow by 12%. If Chinese enterprises can adapt to policy changes through localization and product upgrading, they will still occupy an important position in the market.

In conclusion, Mexico’s tariff hikes on automobiles and home appliances are an inevitable result of its economic strategy adjustment, not mere “trade protectionism.” For Chinese enterprises, this is both a challenge and an opportunity to drive transformation, upgrading, and integration into the global industrial chain. Through precise responses and proactive adjustments, Chinese automotive and home appliance enterprises are expected to find new development space in the Mexican market and achieve win-win cooperation with Mexico’s industries.