As 2026 rolls in, companies must confront the reality that a high-tariff environment is not just a temporary negotiating tactic, but rather a critical and permanent pillar of the Trump Administration’s trade policy.
In this environment, Mexico stands out as uniquely well positioned. While companies sourcing from Asia and other regions face compounding tariff exposure, regulatory uncertainty, and geopolitical risk, Mexico offers something increasingly rare in global trade: proximity to the U.S. market combined with preferential access in a deeply integrated economic region. Properly structured, a Mexico-based supply chain can substantially blunt the impact of Trump-era tariffs and provide long-term stability in an otherwise volatile trade landscape.
That advantage, however, is not automatic. It depends on understanding both the benefits and the traps, particularly the mistaken belief that maquiladora manufacturing in Mexico is automatically tariff-free.
Here’s why Mexico remains the strongest strategic platform in Trump’s trade war, and where maquiladora companies most often get it wrong.
Mexico’s structural advantages
Mexico’s competitive edge is not the result of any single policy or cost factor. It reflects decades of deliberate integration into North American supply chains, reinforced by the current trade environment.
First, Mexico delivers cost-competitive, high-quality manufacturing at scale. Labor costs remain significantly lower than in the United States and Canada, while productivity and technical capability have steadily improved over the past three decades. Mexico combines affordability with reliability, a factor that has become decisive as companies reassess risk after COVID-19-era disruptions.
Second, Mexico is one of the most globally connected trading nations in the world, with free trade agreements (FTA) covering more than fifty countries and well over half of global GDP. This network allows manufacturers in Mexico to source inputs and export finished goods with a level of flexibility that few countries can match. Even when U.S. tariffs increase, Mexico’s broad FTA network can help companies rebalance sourcing and production without dismantling their core footprint.
Third, the depth of Mexico’s North American manufacturing experience is considerable. More than 30 years under NAFTA and now USMCA have created an ecosystem that understands regional rules of origin, customs valuation, and cross-border production. This institutional knowledge dramatically lowers execution risk compared to “greenfield” nearshoring alternatives.
Fourth, Mexico offers strong legal protections for intellectual property and foreign investment, particularly in manufacturing hubs tied to export markets.
Fifth, geography matters more than ever. Mexico is the closest large-scale nearshoring option to the United States, enabling shorter lead times, lower transportation costs, reduced inventory requirements, and greater responsiveness to demand fluctuations. In a world of shipping bottlenecks and geopolitical chokepoints, proximity has become a strategic asset, not merely a logistical convenience.
Finally, Mexico’s long-standing trade facilitation programs, particularly Mexico’s IMMEX program (i.e., maquiladoras), remain powerful trade tools when used correctly. These programs were designed to support export-oriented manufacturing and, when aligned with USMCA compliance, can materially improve cash flow and competitiveness. The key is understanding their limits, especially in today’s tariff-heavy environment.
Taken together, these advantages explain why Mexico is structurally advantaged in a tariff-driven trade regime.
Trump-era tariffs: What actually applies (and what often doesn’t)
Tariffs now operate in layers, and misunderstanding how they interact is one of the most common sources of unnecessary exposure. Importantly, compliance with USMCA requirements can eliminate or significantly reduce the impact of many tariffs, which are summarized below:
- Baseline World Trade Organization (most favored nation) tariffs – They remain applicable based on the 10-digit classification of goods under the Harmonized Tariff Schedule of the United States (HTSUS). For most products, these duties are relatively low or even duty free (i.e., 0%).
- Global (IEEPA) tariffs (e.g., 10%) – They do not apply to goods that qualify as originating under USMCA. For non-originating goods, the tariff applies based on the HTSUS classification of the finished product.
- Reciprocal (IEEPA) tariffs (up to 50%) – Likewise, these tariffs generally do not apply to USMCA-originating goods. For non-originating products, they may apply in addition to baseline MFN duties, subject to interaction rules with other tariff regimes.
- “Fentanyl” IEEPA tariffs – Tariffs imposed under the International Emergency Economic Powers Act, such as the 25% measures targeting Mexico and Canada based on border security and fentanyl concerns, generally do not apply to USMCA-originating goods. These measures – as well as the other IEEPA-based tariffs, such as the Global and Reciprocal tariffs – are the subject of ongoing litigation, with a U.S. Supreme Court decision expected soon to clarify their legality.
- Section 232 Sector-specific tariffs (25%–50%) – These apply primarily to steel, aluminum, copper, and certain downstream products.
- Steel melted and poured, and aluminum smelted and cast, within the USMCA region are generally excluded.
- USMCA-qualifying automobiles and certain trucks are taxed only on the value of non-USMCA content.
- USMCA-qualifying auto parts are currently excluded, though additional sector-specific actions remain possible.
- China-specific tariffs – These tariffs, such as Section 301 tariffs, apply based on substantial transformation, not merely tariff classification shifts. Goods assembled in Mexico using Chinese inputs must undergo sufficient transformation to avoid being treated as Chinese-origin. This creates a compliance distinction: a product can qualify as USMCA-origin for preferential duty treatment while still being exposed to Section 301 tariffs if the substantial transformation threshold is not met.
The central takeaway is simple but often missed: USMCA compliance is the single most effective tool for neutralizing Trump-era tariffs, and Mexico is uniquely positioned to enable that compliance at scale.
Mexican tariffs and the “Maquiladora mistake”
While attention often focuses on U.S. tariffs, Mexico’s own tariff policy now plays a more significant role in supply-chain economics. Beginning Jan. 1, Mexico increased its general (MFN) import tariffs – ranging from 5-50% – across more than 1,400 tariff lines, affecting products from countries without Mexican FTAs, including but not limited to China, South Korea, India, Malaysia, and Thailand.
This brings us to a critical and persistent misconception (the “Maquiladora Mistake”): the belief that maquiladoras (IMMEX companies) are exempt from customs duties. That belief is wrong, and operating under this misimpression can be costly.
IMMEX allows for temporary duty relief on imported inputs, but that relief is constrained by USMCA’s “Lesser of the Two” rule. Under this rule, the duties ultimately owed on non-FTA inputs cannot exceed the lesser of:
(i) the duties payable in Mexico on those inputs, or
(ii) the duties payable upon importation of the finished good into the U.S. or Canada.
In practice, this means that if the finished good enters the U.S. duty-free under USMCA, the maquiladora may owe the full Mexican MFN duty on the non-FTA input. Conversely, if the finished good is dutiable in the United States, that U.S. duty may cap the amount that can be deducted from the duty owed in Mexico – that is, the relief is constrained to the lesser of the two duties.
Mexico does offer additional mitigation tools, such as PROSEC and Eighth Rule programs, which can reduce or eliminate duties for qualifying sectors. They require, though, proactive planning and do not apply automatically.
Mexico works, if you do it right
Trump’s trade war has reshaped global sourcing, but it has not leveled the playing field. If anything, it has amplified the advantages of regional integration and penalized supply chains built on distance, opacity, and tariff arbitrage.
Mexico sits at the center of the winning model: nearshored, rules-based, and deeply integrated into the North American economy. When supply chains are designed to comply with USMCA rules of origin and aligned with Mexican trade programs, Mexico can dramatically reduce tariff exposure while improving speed, resilience, and cost control. In contrast, companies that treat Mexico as a shortcut or assume maquiladora status automatically equals duty-free trade, will be disappointed. Those that invest in compliance, origin planning, and tariff modeling, however, will find that Mexico remains the strongest platform available in a high-tariff environment.
This article originally appeared on Supply & Demand Chain Executive in February 2026.
