Why Trump's Tariff Pledge is Concerning Auto & Tech Sectors

President Trump's recent pledge to impose a blanket 25% tariff on Mexican imports has sent shockwaves through the global automotive and technology sectors, threatening to reshape decades of established manufacturing strategies and international trade relationships.

This proposed policy, which would expand upon his previous administration's trade measures, comes at a particularly critical time for both industries, which have spent the last several years restructuring their supply chains in response to pandemic disruptions, semiconductor shortages and growing geopolitical tensions.

For technology companies, Mexico has emerged as a key nearshoring destination, offering an alternative to Asian manufacturing while maintaining proximity to the US market.

Meanwhile for the automotive sector, Mexico has emerged as a vital manufacturing hub for the global auto industry, attracting billions in investments from Asian, European and American manufacturers.

Currently, Mexico is the US's largest trading partner in manufactured goods, with automotive products representing a substantial portion of this trade.

Against this backdrop, companies across both sectors are being forced to reevaluate their long-term manufacturing and investment strategies, weighing the potential costs of relocating production against the impact of absorbing or passing on tariff-related price increases.

How tariffs could impact the technology sector

The tech industry is braced for multiple tariffs on US imports that are predicted to increase prices for technology enterprises and consumers.

S&P reports: “The tariffs will make the US more competitive with China and lead to more US factories, Trump said.

But industry insiders and supply chain experts question whether US consumers can absorb the price shocks that are expected to result from continuing protectionist economic policies.”

Tech companies could be directly impacted include:

Foxconn

Foxconn is collaborating with Nvidia to build an AI server factory in Mexico.
This facility will produce liquid-cooled servers featuring Nvidia's advanced Blackwell AI chips. The project represents a significant investment in high-tech manufacturing in Mexico, potentially creating jobs and boosting the local economy.
However, the proposed tariffs could impact the cost-effectiveness of this operation, particularly if the servers are intended for export to the US market.

Lenovo

Lenovo operates a substantial production site in Monterrey, Mexico.
This facility produces servers and data centre products exclusively for North American markets.
In 2021, Lenovo expanded this site, indicating its strategic importance for serving the US market.
The proposed tariffs could significantly increase the cost of Lenovo's products in the US, potentially affecting its market share and profitability in the region.

LG Electronics

LG Electronics, based in South Korea, manufactures TVs, home appliances and EV components at its Mexican sites.
The company is currently reviewing potential impacts of changing trade policies on its operations.
LG's diverse product range means that tariffs could affect multiple segments of its business, from consumer electronics to automotive components.
​​​​​​​This means that the company may need to consider relocating production or absorbing additional costs to maintain its competitiveness in the US market.

Asian automakers

Asian automakers have established significant manufacturing operations in Mexico to serve the US market efficiently.

The potential tariffs proposed by President Trump could significantly impact their operations and strategies.

Honda

​​​​​​​Honda Motor, for instance, exports 80% of its Mexican production to the US.
According to Reuters, Shinji Aoyama, Honda's Chief Operating Officer, recently indicated that permanent US tariffs on Mexican imports could force the company to reconsider its production strategy.
This could lead to a major restructuring of Honda's North American operations, potentially affecting thousands of jobs and billions in investments.

Nissan 

Meanwhile, Nissan Motor operates two plants in Mexico, producing models like the Sentra and Kicks for US consumers.
In the first nine months of this year, Nissan produced nearly 505,000 vehicles in Mexico. While specific export figures to the US are not disclosed, it's likely that a significant portion of this production is destined for the US market.
The proposed tariffs could substantially increase the cost of these vehicles for US consumers.

Toyota

Toyota Motor, another major player, manufactures its Tacoma pick-up trucks exclusively in Mexico for export to the US, where it sold over 230,000 units last year. 
This represents about 10% of Toyota's total US sales, making it a significant part of their North American strategy.
​​​​​​​A 25% tariff on these vehicles could severely impact Toyota's competitiveness in the crucial US truck market.

Mazda

Mazda also relies on Mexican facilities, exporting around 120,000 vehicles annually to the US.

Reuters says Mazda’s President, Masahiro Moro said earlier this month that the tariff issue is "not a problem that can be solved by individual companies" and it would carefully examine the details before deciding its response.

Tesla suppliers

Tesla has encouraged its Chinese suppliers to set up plants in Mexico to support its planned Gigafactory there.

However, recent developments have complicated this strategy.

Tesla has largely walked away from its goal to start production in Mexico in early 2025, shifting focus to expanding its Texas plant instead.

This shift in strategy is likely influenced by the uncertain trade environment.

Elon Musk, Tesla's CEO, stated in a financial update that uncertainty surrounding potential tariffs would make it impractical to invest heavily in the Mexican plant.

However, Mexican government officials have stated that Tesla has already received US$135m in incentives to build the factory.

Chinese automakers and suppliers

Chinese automotive component manufacturers have been producing in Mexico for years to supply major automakers like General Motors and Toyota.

Companies such as Yanfeng Automotive Interiors have leveraged Mexico's cost advantages to support these operations.

Meanwhile, BYD, China's leading EV maker, is exploring opportunities to build a plant in Mexico but intends to serve local markets rather than exporting to the US.

This strategy may help BYD avoid potential tariffs while still expanding its global footprint.

JAC Motors has partnered with Giant Motors since 2017 to assemble vehicles locally, while SAIC Motor, MG brand announced plans for a new plant.

These moves indicate a growing Chinese presence in the Mexican auto industry, which could be significantly affected by new tariffs.

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