Mexico Waives Tariff on Car Assembly Parts

MEXICO · TRADE

Mexico has waived its 10% import tariff on car assembly parts for five years, starting on Wednesday, 14 October. President Claudia Sheinbaum’s decree aims to bring car lines to Mexico for vehicles the country now imports whole.

For US readers, the move comes during unfinished talks with Washington over the USMCA, the North American trade pact. It also makes it cheaper to build cars inside Mexico, a market where Chinese brands have won many buyers.

What the Decree Changes

The decree appeared in the Diario Oficial de la Federación, Mexico’s official gazette, on Tuesday, 13 October. It was signed on Friday, 9 October, by Sheinbaum, Finance Secretary Édgar Amador Zamora and Economy Secretary Marcelo Ebrard.

It covers one tariff line, 9803.00.01, for car assembly parts and components brought into Mexico. Until now those imports paid a 10% duty, which the decree says could deter new production and assembly lines.

From Wednesday, the rate is zero for five years, but only for vehicle makers with a bonded-warehouse permit under Mexico’s customs law. A bonded warehouse lets a factory hold imported goods under customs control, and firms must also follow Economy Ministry guidelines.

The business daily El Economista described the change as a unilateral opening that covers car assembly parts from anywhere in the world. Mexico’s Foreign Trade Commission, the government body that advises on tariff changes, gave its opinion before the decree was issued.

Why Mexico Wants Kit Assembly

The decree singles out projects that start with so-called SKD and CKD assembly, short for semi knocked down and completely knocked down. In plain terms, a car arrives in Mexico as a partly or fully dismantled kit and is put together locally.

The government calls these kits a first step towards more complex manufacturing with more Mexican suppliers. A full car plant needs long planning and new local suppliers, the decree says, while kit lines can use existing factories.

The text ties the measure to Plan México, the industrial strategy Sheinbaum presented on 13 January 2025 to replace imports with local production. Its stated goal is to make more of the light vehicles sold in Mexico inside the country.

Sheinbaum, president since October 2024, leads a government of Morena, the left-wing party founded by her predecessor Andrés Manuel López Obrador. Ebrard, one of the key players in Mexico’s economy, co-signed the decree as economy secretary.

Chinese Carmakers and the 50% Tariff

Mexico’s Congress approved higher tariffs on goods from countries without a trade deal on 10 December 2025, and they took effect on 1 January 2026. Most new passenger cars from those countries now pay 50%, according to the official gazette.

China has no free-trade agreement with Mexico, so its car exports carry the full rate. Imports of Chinese cars fell 31.1% to 158,571 units in the first half of 2026, El Economista reported in August, citing Economy Ministry figures.

Several Chinese brands, among them BYD, Chery, MG, Geely, Great Wall and GAC, had looked at building assembly plants in Mexico. El Economista reported on 1 October that they had put those plans on hold over the uncertain future of the USMCA.

The paper said BYD had dropped its plant plan and Geely was weighing the Aguascalientes plant Mercedes-Benz had left, with no deal yet. The decree names no country or brand, so the zero tariff on car assembly parts applies equally to American, Asian and European carmakers.

Why Washington Is Watching

The US Trade Representative said on 1 July that the United States did not agree to renew the USMCA in its current form. The pact remains in force while talks continue, and Sheinbaum said on 12 October that there is still no final deal.

Under the USMCA, a car needs 75% regional content to count as North American, up from 62.5% under NAFTA, the 1994 pact it replaced. El Economista reported that Chinese carmakers fear a new cap on Chinese parts in Mexican-built cars.

“At this moment they have no guarantees of how the rules of origin will end up,” former USMCA negotiator Kenneth Smith Ramos told El Economista. The paper said the plans will stay paused until the region’s new trade rules are settled, a core question in Mexico’s geopolitics.

On 7 October, Mexico was one of 14 economies that joined a US-led statement against global excess capacity in manufacturing. The pledge lines Mexico up with a core US trade priority while the USMCA talks continue.

What It Means for You

For US car buyers, nothing changes at once, because the decree’s stated aim is more cars built for the Mexican market. Kit-built cars would still have to meet the USMCA’s 75% regional content rule to count as North American.

For investors in carmakers with Mexican plants, the decree says the zero rate on car assembly parts cuts the cost of new assembly projects. The same benefit is open to rivals, including Chinese brands, that set up qualifying assembly lines in Mexico.

For expats who live in Mexico City or elsewhere in the country, it is too early to say whether car prices will move. Any effect depends on which companies use the exemption, a question the decree leaves open.

What Is Not Known

The decree does not name any carmaker, investment, factory site or job target. It also gives no estimate of the revenue Mexico will give up by waiving the tariff on car assembly parts.

The Economy Ministry guidelines that firms must follow are not spelled out in the decree. How Washington will view the measure in the USMCA talks is also unknown, as is whether Chinese brands will revive their paused plans.

More: Mexico news in English, every day from The Rio Times.

Frequently Asked Questions

What did Mexico change on 14 October?

Mexico cut its import tariff on car assembly parts under tariff line 9803.00.01 from 10% to zero. The change lasts five years and applies only to qualifying vehicle makers.

Who can use the zero tariff on car assembly parts?

Only carmakers with a bonded-warehouse permit to assemble and make vehicles under Mexico’s customs law. They must also follow guidelines set by the Economy Ministry.

Does this help Chinese carmakers?

The decree names no country or brand, so any qualifying carmaker can import car assembly parts tariff-free. Finished Chinese cars still pay Mexico’s 50% tariff on vehicles from countries without a trade deal.

Will this make cars cheaper in the United States?

Not directly, because the decree’s stated aim is more cars built for the Mexican market. Cars sold into the US under the pact must still meet the USMCA’s 75% regional content rule.

Sources: Diario Oficial de la Federación, decree modifying the import tariff (TIGIE 9803.00.01), 13 October 2026; Diario Oficial de la Federación, decree reforming tariff lines (50% on cars from non-FTA countries), 29 December 2025; Office of the US Trade Representative, statement on the USMCA joint review, 1 July 2026; Office of the US Trade Representative, joint ministerial statement on excess capacity, 7 October 2026; López-Dóriga Digital, Seguimos dialogando, afirma Sheinbaum sobre negociaciones del T-MEC, 12 October 2026; El Economista, México elimina arancel de 10% a la importación de autopartes por 5 años, 13 October 2026; El Economista, Automotrices chinas meten freno de mano a inversiones en México, 1 October 2026; La República (El Economista report), Chinese car imports to Mexico fall 31.1%, 31 August 2026; Forbes México, Gobierno publica decreto que exenta temporalmente a autopartes del arancel de 10%, 13 October 2026; El Informador, Eliminan arancel de 10% a la importación de autopartes en México, 13 October 2026; Tiempo (Chihuahua), Quita Sheinbaum arancel para atraer ensamble de autos a México, 13 October 2026.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief

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