Optimism still reigns across Mexico’s auto industry

Tariffs don’t scare Mexican automakers; the US needs them more than it thinks.

The transition to electric vehicles (EVs) is afoot. It requires an industrial transition away from industrial combustion engines (ICE) to lithium batteries, from low-voltage harnesses to high-voltage harnesses. It was, thought the execs at AMN—a Mexican company servicing the automotive industry—the perfect moment to begin production of low-voltage harnesses for exactly the sort of petrol-burning cars that are supposed to be on the out.

The global car industry is so integrated in weird and wonderful ways that counterintuitive ideas are what keep the sector going. The reasoning is simple: Though the US car industry is transitioning into EV manufacturing it doesn’t mean that customers are going to stop buying ICE vehicles immediately. AMN’s solution was to partner with a Chinese company specialised in harnesses, transfer their tech knowhow to the borderlands in northern Mexico, and make up for lost industrial capacity stateside as US manufacturers switched to high-voltage harnesses.

Then came Trump, who specifically threatened the Mexican auto industry, saying he’d slap tariffs on the sector plus another round on April 2nd. The media and analysts have declared the virtual death of the North American car industry since then. And true, it will be completely transformed, but Mexican automakers are not despairing—in fact, many are surprisingly optimistic.

The reason is the same one that drove AMN to opt for seemingly outdated technology on seeing the rise of EVs. Trump’s tariffs, purportedly aimed at bringing car manufacturing back to the US, will indeed reconfigure the industry—but it won’t make his country’s auto sector less dependent on Mexico. It may even deepen that dependence.