Trump’s expensive reinvention of the North American car industry

The effect of US auto tariffs a year into its trade war with Mexico.

The Mexican auto industry seems to be holding fast in the face of Donald Trump’s tactic of negotiation by economic warfare.

It has been almost a year since the US president announced tariffs on Mexican light vehicles and yet the optimism of Juan Carlos Cruz, CEO of Arce Tools—an equipment supplier to car manufacturers—remains as unwavering as when The Mexico Political Economist interviewed him in February of 2025.

Speaking to The Mexico Political Economist again this week, Cruz insisted that the real threat came, not from the US, but from the quiet encroachment of Chinese auto and auto part imports. He said he was delighted about the tariffs; Mexico’s tariffs on Chinese imports, that is—adding that he believed that Canada’s pivot towards China would actually strengthen Mexico’s hand both in negotiations with the US and by undermining the Canadian auto industry by opening its doors to Chinese imports.

Cruz said he’d much rather pay a bit more to access the US market than to be undercut by a flood of Chinese competition.

Integration punished

Yet, a big reason Cruz has done so well is because his auto-sector tools company supplies Mexico’s domestic autosector. For their part, those companies which integrated into the broader North American car industry have been affected more markedly.