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.

The proposed tariff increases, ranging from 10% to 50% ad valorem across sectors including automotive, textiles, steel, aluminum, plastics, electronics, furniture, footwear, paper, glass, and toys, signal a decisive pivot toward import substitution industrialization (ISI) and economic nationalism. This article examines the legal framework, economic rationale, and international trade law implications of Mexico's proposed tariff reform.

If approved, the tariffs will remain in force, in principle, until 31 December 2026.

Scope of the reform

The September 2025 initiative would amend Mexico's tariff schedule by modifying more than 1,500 specific tariff lines, affecting imports across multiple industrial sectors. The proposed 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 free trade agreements (FTAs).

Key sectoral impacts include:

• Automotive sector: Tariffs of 35-50% on passenger vehicles, commercial vehicles, automotive parts, and components (tariff codes 8703.xx, 8704.xx, 8708.xx series)

• Steel and aluminum: Comprehensive coverage with 20-50% tariffs on primary steel products, finished steel goods, and aluminum articles (Chapter 72 and 76 products)

• Textiles and apparel: Rates of 35-50% across the textile value chain, from yarns and fabrics to finished garments (Chapters 50-63)

• Plastics and chemicals: 10-35% tariffs on plastic resins, manufactured plastic goods, and chemical intermediates (Chapter 39)

• Electronics and appliances: 35% rates on consumer electronics, household appliances, and electrical components

• Furniture and toys: Uniform 35% tariffs on finished consumer goods (Chapters 94 and 95)

Economic Policy Rationale

The tariff initiative directly implements Mexico's National Development Plan (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 Mexico, President Sheinbaum's flagship industrial policy, explicitly targets transforming Mexico into the world's 10th largest economy through strategic reindustrialization. The Plan identifies specific sectoral goals: replacing 15% of textile imports, achieving 50% domestic content in footwear, and expanding domestic production of electronic components, aluminum parts, and battery cells for electric vehicles.

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

The Article XXVIII process could prove complex and time-consuming, particularly given the breadth of Mexico's proposed increases affecting multiple sectors and trading partners.

Affected countries could potentially initiate WTO dispute settlement proceedings if Mexico's tariffs were to violate bound commitments.

FTA-compliant goods excluded

Imports of goods originating from countries with which Mexico maintains a regional trade agreement are excluded from any tariff increases. Mexico maintains an extensive network of preferential trade agreements, including:

• USMCA/T-MEC

• 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 proposed MFN tariff increases will not affect goods qualifying for preferential treatment under these agreements.

While goods qualifying under Mexico's FTAs will continue to get preferential or zero tariffs, if a product uses inputs from non‐FTA sources, those inputs may face higher duties, depending on applicable rules of origin under such FTAs.

Key actions to consider

Companies engaging in or with Mexico may want to consider the following actions:

• Conduct line-by-line HS code analysis now, to see whether your inputs or finished goods are among those ~1,500 product lines.
• Analyze input supply chains: if non-FTA inputs are critical, consider securing supply from FTA‐origin sources or redesigning production where feasible.
• Monitor the legislative process carefully: amendments are possible, and rates or exemptions may change.
• Build compliance capacity: origin verification, customs classification, record keeping.
• Consider engaging with Mexican authorities / trade negotiators if you are in an affected sector: sometimes input from industry can influence final legislative text (e.g., carve-outs, transition periods).

Conclusion

Mexico's proposed MFN tariff increases represent a fundamental shift in trade policy philosophy, marking a return to import substitution industrialization after four decades of trade liberalization. While the initiative aligns with legitimate development objectives and enjoys some flexibility under 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 temporary character of the measures provides an opportunity to demonstrate results and adjust policies based on economic outcomes.

From an international trade law perspective, Mexico must carefully navigate WTO obligations while implementing its industrial policy objectives. The breadth of the proposed tariff increases, affecting over 1,500 product lines, creates potential for legal challenges and retaliation that could undermine the policy's economic benefits.

As Mexico implements 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 liberalization and national industrial policy objectives. The Mexican experience may serve as either a model for developing country industrial policy or a cautionary tale about the limits 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

⁠⁠- 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 (available here).