U.S.-Mexico tariff talks are stalling over auto and metals duties

Commerce Secretary Howard Lutnick has opposed deep cuts to U.S. tariffs on Mexican vehicles and metals, holding up progress toward a trade deal with Mexico, according to The Wall Street Journal.

The two countries had been nearing a deal under which Washington would cut tariffs on autos, steel and aluminum while Mexico offered several concessions of its own, according to the Journal. Such a deal would set the stage for broader negotiations on renewing the U.S.-Mexico-Canada Agreement.

Disagreements over the vehicle and metals tariffs have slowed the talks, according to the Journal. Those tariffs rest on national-security justifications and are overseen by Lutnick's department. Officials in both countries said negotiations are ongoing and rejected the suggestion that discussions had hit a standstill.

According to the Journal, Lutnick has pushed back against steep cuts to the 50% tariffs on steel and aluminum, as well as the 25% levy on Mexican automobiles. He has also objected to lowering duties on derivative products, meaning completed goods that are manufactured from steel and aluminum. Domestic aluminum companies have warned the administration that lowering these tariffs would hurt American-based businesses, according to the Journal.

Auto tariffs have been a central issue in the negotiations. Mexico has proposed limiting duties to the share of a vehicle's value that originates outside North America, rather than taxing the full price. The U.S. has pushed for vehicles to contain 50% American-made parts as a condition for lower rates, a threshold that Mexico and the auto industry have broadly viewed as impractical.

Mexican President Claudia Sheinbaum said on Tuesday that her government is working to buy more American goods and curb imports from third countries to reduce the U.S. trade deficit with Mexico. Mexico's goods trade surplus with the U.S. rose 51% in the first eight months of the year to more than $280 billion.

Officials in both countries have viewed an interim trade agreement as politically advantageous before the Nov. 3 midterm elections, when President Donald Trump's Republican Party risks losing control of Congress. Sheinbaum's administration sees a deal as important for reassuring markets and investors given Mexico's weak economy and falling credit ratings.

The talks are also unfolding after U.S.-Canada negotiations collapsed, leaving those two countries in an escalating tariff dispute. More than 80% of Mexico's exports go to the United States.