1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 96
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
Finally, the USMCA review will likely trigger heightened tariff threats from the White House as
part of negotiations for a revised agreement requiring higher regional content shares for dutyfree treatment. For instance, in the case of autos, the content share could climb from 75% to
80%, and the U.S. could seek to increase the high-labour-cost value share (which favours U.S.
over Mexican labour) from 40%-45% to 45%-50%, with both increases phased in over a few
years. The broad 60% regional content rule for most other goods imports may also expand by a
few percentage points. While the legality and future of Trump’s tariffs remain unclear, if Mexico
and Canada reject U.S. demands, the U.S. would likely impose double-digit tariffs on goods
regardless of their compliance with current USMCA requirements.
Until the USMCA review is completed, output and investment prospects for Mexico’s
manufacturing sector will likely remain downbeat. An eventual resolution along the lines
proposed above could revive some momentum in the sector as firms adapt and uncertainty
fades, but stricter rules of origin would still have a negative impact in the current context. More
onerous duty-free requirements could also cause firms to reconsider the build-out of
operations in northern Mexico, which has been a bright spot for growth in recent years.
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