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Mexico One Year On: Between Tariff Shock and Nearshoring Boom

© Adobe Stock / Zerophoto

Location Mexico, Source: Adobe Stock / Zerophoto

About a year ago, we reported here on Mexico's rise as a sought-after hot spot for trade and production, taking a particular look at the steel industry as the backbone of the automotive, aerospace, and medical technology sectors. At the time, it was unclear how hard the announced US tariffs would hit the country. A year on, it is clear that they have plunged the Mexican steel industry into one of the deepest crises of its recent history. At the same time, Mexico continues to boom as an investment location like never before — including, and especially, from Europe: Klöckner is doing it, thyssenkrupp Materials Services is doing it, Waelzholz is doing it. For many European steel and metal companies, Mexico remains the most important marketplace for the future on the American continent, tariff shock notwithstanding. In this text, we offer an update on the latest developments. 

What last year's report described as a possible scenario has long since become everyday reality. Since March 2025, the US has levied an additional 25% tariff on steel and aluminum imports, rising to 50% since June 2025. In April and June 2026, Washington further tightened the rules with a new tiered model. Goods made wholly or almost wholly of steel, aluminum, or copper have since faced a 50% tariff on the entire value of the goods, no longer just the metal content. For derivatives with a predominant metal content, the rate is 25%, while certain metal-intensive capital goods benefit from a reduced rate of 15% (limited until 2027). 

© Adobe Stock / Schlierner

Tariff with Euro, Source: Adobe Stock / Schlierner

The consequences for Mexico are drastic. According to industry association Canacero, Mexican steel exports to the US collapsed by around 49% in 2025. Production and consumption have also been stagnating at low levels for years. The five-year comparison already shows this stagnation: steel consumption fell from 25.5 to 25 million tonnes, while production dropped from 17.9 to 16.8 million tonnes — a decline of 2% and 6% respectively since 2021. However, the downturn only became truly pronounced over the past year. 

Net International Trade with United States, according BCMM
Monthly Flow; Quelle: https://www.economia.gob.mx/datamexico/en/profile/country/estados-unidos?foreignYears2=2026 [accessed 20.08.2026]

The USMCA Turning Point of July 2026 

Six years after it took effect, the USMCA (United States–Mexico–Canada Agreement) underwent its first scheduled review, provided for under the agreement, on 1 July 2026. The US did not agree to a standard extension. US Trade Representative Jamieson Greer stated that Washington had not agreed to continue the agreement "in its current form." While the agreement remains fully in force — tariff preferences, rules of origin, and dispute settlement remain unchanged for now — it will in future be reviewed annually and would expire in 2036 without agreement. Bilateral negotiation rounds between the US and Mexico on steel, aluminum, automobiles, and agriculture have been underway since May 2026, with a third round scheduled for late July. For the industry, this means above all continued planning uncertainty, in place of the "stable political conditions" that characterized Mexico just a year ago. 

Mexico Strikes Back: Tariff Reform and "Compre Acero Mexicano" 

The Mexican government and industry are responding with their own protective measures. As early as December 2025, Canacero welcomed a reform of Mexico's import tariff law (LIGIE), which imposes higher taxes on imports from countries without a trade agreement with Mexico. This was seen as a first step against what the industry considers unfair competition from subsidized imports, particularly from Asia. A further building block followed in late April 2026: the government of President Claudia Sheinbaum, together with representatives of the steel, construction, and housing industries, signed the "Agreement to Promote the Mexican Steel Industry," which aims to prioritize domestic steel for public procurement and state-funded construction projects going forward. This measure is intended to partly offset lost US demand through the domestic market. 

© Adobe Stock / nordroden

Plant for the production of cement, aerial photography, Source: Adobe Stock / nordroden

Regionally, production remains concentrated in familiar areas. Michoacán leads with 2.86 million tonnes, ahead of Nuevo León (2.65 million t), Veracruz (1.99 million t), Guanajuato (1.79 million t), and San Luis Potosí (1.12 million t). The automotive and industrial clusters identified in last year's report thus remain the load-bearing regions for steel as well. 

Tariff Shock Meets Nearshoring Record 

The contrast with the wider economy is striking. While steel exports collapse, Mexico continues to post record nearshoring figures. Bilateral goods trade with the US reached an all-time high of $872.8 billion in 2025, and more than half of foreign direct investment in 2026 is now explicitly nearshoring-driven — a marked increase from just under a third four years ago. Sectors such as pharmaceuticals, medical technology, automotive supply, and digital technologies are particularly benefiting. Mexico has thus overtaken China as the US's most important trading partner. Even so, uncertainty is growing around these investments as well, as the USMCA revision looms: stricter rules of origin (at least 75% regional value content for vehicles) and sector-specific tariffs are eroding the advantage of a North American location. 

European Companies as Drivers of the Nearshoring Boom 

A significant part of this wave of investment originates in Europe. As early as 2023, German steel distributor Klöckner & Co acquired Mexican steel service provider National Material of Mexico for $340 million, expanding its position precisely where the region's most important automotive and industrial customers are based. thyssenkrupp Materials Services invested in a new service center in San Luis Potosí, in central Mexico, citing Mexico as a clear growth market given the transformation themes of electromobility, sustainability, and supply chain resilience. Hagen-based cold rolling specialist Waelzholz also recently announced the construction of its first own plant in Mexico, which will supply the North American market from near Saltillo starting in mid-2028. 

That new capacity is being built precisely now, even as US tariffs hit the Mexican steel industry hard, may at first seem contradictory. For European companies, however, what matters less is exporting out of Mexico than gaining direct, local access to the North American market itself. This approach is explicitly favored by USMCA rules of origin and sidesteps sector tariffs for many product categories. Whether this calculation remains viable given the ongoing USMCA revision and stricter value-content requirements will depend on the outcome of the negotiation rounds. 

A Difficult Road Out of the Crisis 

No quick way out is in sight for the Mexican steel industry in 2026/27. As long as the Section 232 sector tariffs remain in place and the future of USMCA is unresolved, the US market is likely to remain difficult for Mexican steel. In parallel, the industry is increasingly focusing on the domestic market, state support, and defensive measures against Asian imports. Whether this will be enough to return stagnating production to a growth path will also depend on the outcome of the negotiation round scheduled for late July 2026. 

A barometer for sentiment in the wire, cable, and tube industry will be the next edition of wire & Tube Mexico, taking place 23–25 February 2027 at Cintermex in Monterrey as part of the established Expo Manufactura. Following strong growth at the previous 2025 event, which drew over 160 exhibitors from around 20 countries, organizers again expect growth in both visitor and exhibitor numbers. Given current trade uncertainties, the 2027 show is likely to be an important venue for discussing new sales markets beyond the US, as well as investment in automation and digitalization within the industry. Further information is available at wire-tube-mexico.com 

Further Information and Sources 

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