On 9 September 2025, the Mexican Executive submitted to Congress a comprehensive legislative initiative to reform Mexico's General Import and Export Tax Law (Ley de los Impuestos Generales de Importación y Exportación - LIGIE), proposing sweeping increases to Most Favored Nation (MFN) tariff rates across more than 1,500 product lines. This initiative, presented by President Claudia Sheinbaum Pardo, represents the most significant shift in Mexico's trade policy since the country's embrace of trade liberalization in the 1980s and entry into NAFTA in 1994.​

Following several weeks of technical work and political negotiation, on 8 December 2025 Mexico's Chamber of Deputies' Committee on Economy, Trade and Competitiveness approved a committee report (dictamen) on the initiative, clearing the first major legislative hurdle and sending the draft decree to the plenary for final consideration. On 9 December 2025, the Chamber of Deputies approved the reform in plenary session, and on 10 December 2025 the Senate of the Republic subsequently endorsed the decree, thereby completing congressional approval and sending the measure to the Executive for promulgation. The approved text refines the scope of the original proposal and adjusts a number of tariff levels, but maintains the core policy objective of substantially increasing MFN tariffs on imports from countries without a free trade agreement (FTA) with Mexico.​​

The tariff increases, generally ranging from 10% to 50% ad valorem across sectors including automotive, textiles, steel, aluminium, plastics, electronics, furniture, footwear, paper, glass and toys, signal a decisive pivot toward import-substitution industrialisation and economic nationalism. This article examines the legal framework, economic rationale and international trade law implications of Mexico's tariff reform package as finally approved by Congress, as well as its interaction with Mexico's WTO obligations and FTA commitments.​

Following Senate approval, the decree is now poised to be promulgated and published in the Diario Oficial de la Federación with an entry into force date of 1 January 2026 and a scheduled expiry on 31 December 2026, aligning with the time horizon of Mexico's 2026 federal revenue and industrial policy planning.

Scope of the reform

The approved changes establish new MFN tariff rates that will apply to imports from countries without preferential trade agreements with Mexico, while maintaining existing preferential access for goods qualifying under Mexico's network of FTAs. In many cases, the tariff for targeted products has been set at 25% or 35%, with specific lines reaching up to 50% and a limited number of strategic inputs held at lower rates (e.g., 5% or 10%) to mitigate manufacturing costs.

Key sectoral impacts include:

• Automotive sector: Tariffs generally set at 25% to 35% on various automotive parts and components (e.g., tariff codes 8708.xx series like axles, radiators, and suspension systems), with higher rates for certain finished units and lower rates (e.g., 5-10%) for specific inputs not produced domestically.

• Steel and aluminium: Comprehensive coverage with tariffs typically ranging from 25% to 35% on primary steel products, finished steel goods, and aluminium articles (Chapter 72 and 76 products), reflecting concerns about import competition from non-FTA producers.

• Textiles and apparel: A heavy concentration of 25% and 35% rates across the textile value chain, covering yarns, fabrics, and finished garments (Chapters 50–63), which constitutes one of the largest blocks of protected tariff lines.

• Plastics and chemicals: Tariffs generally ranging from 5% to 25% on plastic resins, manufactured plastic goods, and selected chemical intermediates (Chapter 39), with specific adjustments to avoid penalising indispensable industrial inputs.

• Electronics and appliances: Rates of 25% to 35% on a range of consumer electronics, household appliances, and electrical components, particularly where domestic production is being promoted.

• Furniture and toys: Largely uniform 25% to 35% tariffs on finished consumer goods (Chapters 94 and 95), aimed at encouraging domestic manufacturing in labour-intensive segments.

The legislative process has therefore moved the proposal from a broad initial framework to a more granular tariff structure, calibrated to reinforce domestic industrial capacity while maintaining alignment with Mexico’s international trade obligations.

Economic policy rationale

The tariff initiative directly implements Mexico's National Development Plan 2025-2030 (Plan Nacional de Desarrollo 2025-2030), particularly its third strategic axis: "Moral Economy and Work". The Plan establishes ambitious industrial policy objectives, including:

• 50% domestic content target in strategic supply chains by 2030

• 1.5 million new manufacturing jobs in high-value sectors

• $14 billion import substitution in advanced materials and chemicals

• 15% increase in domestic content for automotive and electronics sectors

Plan México, President Sheinbaum's flagship industrial policy, explicitly targets transforming Mexico into one of the world's ten largest economies through strategic reindustrialisation. The Plan identifies specific sectoral goals, such as replacing 15% of textile imports, achieving 50% domestic content in footwear, and expanding domestic production of electronic components, aluminium parts and battery cells for electric vehicles. The MFN tariff increases are presented as a core instrument to create "breathing space" for these sectors to develop, while still operating within Mexico's dense network of regional trade agreements.​

In parallel, the Federal Revenue Law for the 2026 fiscal year (Ley de Ingresos de la Federación 2026) projects a significant increase in customs revenue from import duties, implicitly relying on the approval and timely implementation of the LIGIE tariff reform to meet those fiscal targets. The tariff package is thus simultaneously an industrial policy tool and a revenue-raising measure.

Mexico's WTO bound tariff commitments

Mexico claims that its proposed tariff reform is consistent with Article II (Schedules of Concessions) of the General Agreement on Tariffs and Trade of 1994 (GATT 1994). Mexico's WTO Schedule of Concessions (Schedule LXXVII) establishes maximum "bound" tariff rates that the country has committed not to exceed for specific products. The proposal treats all non‐FTA country imports similarly, which is in principle compliant with the MFN principle. Provided there are no ad hoc country‐specific exceptions beyond what is allowed under WTO or FTAs, MFN obligations should be maintained.

According to WTO data, Mexico maintains relatively high bound tariff rates—averaging 36.2% for all goods, 45.0% for agricultural products, and 34.8% for non-agricultural goods—providing substantial wiggle room between bound and applied rates. Mexico's current applied MFN rates average only 7.1% across all products, suggesting that many of the proposed increases may remain within existing bound commitments.

Should Mexico's proposed tariffs were to exceed bound rates when ultimately adopted, however, the country would need to invoke GATT Article XXVIII (Modification of Schedules) procedures. This process requires:

• Consultation and negotiation with countries holding "initial negotiating rights" and "principal supplying interests"
• Substantial equivalence in compensatory tariff reductions on other products
• Formal notification to the WTO and affected trading partners

Given the breadth of Mexico's proposed increases across multiple sectors and trading partners, an Article XXVIII process could prove complex, politically sensitive and time‑consuming.​

Affected WTO Members could potentially initiate dispute settlement proceedings if Mexico's tariffs were to violate bound commitments or otherwise breach WTO disciplines, for example through discriminatory application or the introduction of prohibited country-specific measures disguised as MFN increases.

FTA-compliant goods excluded

Imports of goods originating in countries with which Mexico maintains a regional or bilateral trade agreement are excluded from any MFN tariff increases under the reform. Mexico maintains an extensive network of preferential trade agreements, including:​

• USMCA/T-MEC/CUSMA

• Comprehensive and Progressive Trans-Pacific Partnership (CPTPP)

• Mexico-EU Global Agreement

• Pacific Alliance agreements

• Various bilateral FTAs with Latin American, European, and Asian partners

The MFN tariff increases will not affect goods that qualify for preferential treatment under these agreements, which will continue to enter at reduced or zero tariff rates, subject to compliance with applicable rules of origin.​

However, where a product manufactured in an FTA partner country incorporates inputs sourced from non‑FTA suppliers, those inputs may face higher duties when imported into Mexico, potentially complicating origin compliance and cost structures along regional value chains. Firms relying on complex supply chains that span both FTA and non‑FTA countries may therefore experience indirect cost increases even if their finished products continue to qualify for preferential rates.

Key actions to consider

Companies engaging in or with Mexico may wish to consider the following actions in light of the committee-approved dictamen and the final congressional approval of the new tariffs, which are expected to apply from early 2026:​

• Conduct line‑by‑line HS code analysis: Map your inputs and finished goods against the 1,463 affected tariff lines to identify exposure to the new MFN rates and any mitigating classifications.​

• Analyse input supply chains: If non‑FTA inputs are critical, consider securing supply from FTA‑origin sources, redesigning production processes or re‑engineering products where commercially feasible to optimise origin and tariff treatment.​

• Monitor the legislative and regulatory process: Track the remaining stages of the legislative process (plenary votes in the Chamber of Deputies and Senate, and subsequent publication in the Diario Oficial de la Federación), as well as any implementing regulations or customs guidance that may clarify scope, timing and administration.​

• Build compliance capacity: Strengthen internal capabilities in origin verification, customs classification and record‑keeping to manage higher stakes in tariff treatment and to respond to potential audits or verifications by Mexican customs authorities.​

• Engage with authorities and industry associations: Where materially affected, consider engaging with Mexican authorities, embassies and industry associations to raise sector‑specific concerns, seek clarifications or advocate for technical adjustments (for example, carve‑outs, transition periods or rate modifications) in the remaining legislative or regulatory stages.

Conclusion

Mexico's MFN tariff reform, as now approved by both Chambers of Congress, represents a fundamental shift in trade policy philosophy, marking a return to import‑substitution industrialisation after four decades of trade liberalisation. While the initiative aligns with articulated development objectives and appears to operate within the formal flexibilities of Mexico's WTO commitments, it raises significant questions about economic efficiency, international legal compliance and long‑term competitiveness.​

The success of Mexico's new industrial policy will depend not merely on the level of tariff protection provided, but on the country's ability to use this protection strategically to build genuine comparative advantages while maintaining integration with global value chains. The formally temporary character of the measures, scheduled in principle to expire at the end of 2026, provides an opportunity to demonstrate tangible results and to adjust policies in light of economic outcomes.​

From an international trade law perspective, Mexico must carefully navigate its WTO obligations while implementing its industrial policy objectives, particularly in ensuring that applied tariffs remain within bound levels and that MFN and national treatment principles are respected in practice. The breadth of the tariff increases, affecting 1,463 product lines, creates potential for legal challenges and trading partner responses that could undermine the policy's intended economic benefits if not managed with legal and diplomatic care.​

As Mexico implements and potentially revises these measures, the international trade community will closely monitor their economic impact and legal compliance, potentially influencing broader debates about the appropriate balance between multilateral trade liberalisation and national industrial policy. The Mexican experience may serve either as a model for contemporary industrial strategy within the WTO framework or as a cautionary tale regarding the limits and unintended consequences of protective trade measures in an interconnected global economy.​

De Minimis Law will continue to monitor Mexico's tariff developments closely and stands ready to advise on compliance, risk mitigation, and trade dispute resolution in this volatile environment. For further updates or assistance in navigating these complex trade issues, please contact our office.

Disclaimer:

This article is for informational purposes only and does not constitute legal advice.

Resources

- List of products as approved by the Senate of the Republic (available here).

- Stenographic version of the ordinary session of the Senate of the Republic in which the decree amending various tariff fractions in the Schedule to the Law on General Import and Export Taxes was approved, 10 December 2025 (available here).

- Committee on Economy, Trade and Competitiveness, Opinion of the Committee on Economy, Trade and Competitiveness, containing the draft decree amending various tariff items in the Schedule to the Law on General Import and Export Taxes (Parliamentary Gazette, Year XXIX, No 6935, 9 December 2025) (available here)

- Reservations (proposed amendments) to the Opinion of the Committee on Economy, Trade and Competitiveness, containing the draft decree amending various tariff items in the Schedule to the Law on General Import and Export Taxes (Parliamentary Gazette, Year XXVIII, No 6935-RC, 9 December 2025):

----- Reservations (proposed amendments) from the MORENA Parlamentary Group (available here)

----- Reservations (proposed amendments) from the PAN Parlamentary Group (available here)

----- Reservations (proposed amendments) from the PT Parlamentary Group (available here)

----- Reservations (proposed amendments) from the PRI Parlamentary Group (available here)

----- Reservations (proposed amendments) from the Movimiento Ciudadano Parlamentary Group (available here)

⁠⁠- Original Draft Decree Initiative to Amend Certain Tariff Classifications under the Schedule to the Law on General Import and Export Duties, published in Mexico's Parliamentary Gazette, Year XXVIII, No 6872-IX, 9 September 2025 (available here).

- Mexico's National Development Plan 2025-2030 (available here)