Unlock stock picks and a broker-level newsfeed that powers Wall Street.Upgrade Now
What Mexico’s New Tariffs and Trade Restrictions Could Mean for US Businesses
Kate Nishimura
10 min read
Recent news of Mexico’s decision to levy tariffs on textile and apparel products—and institute new restrictions on its Manufacturing, Maquiladora and Export Services Industry (IMMEX) program—have left many industry insiders scratching their heads.
What do these changes mean for U.S. brands, and for the relationship between the U.S. and Mexico more broadly?
Days before the Christmas holiday, Mexico’s economy minister Marcelo Ebrard announced that the country would boost import tariffs on a range of apparel and textile products and inputs by up to 35 percent. Notably, though, U.S.-Mexico-Canada Agreement-qualifying products are exempt from the duties, which will remain in place until April 22, 2026.
Concurrently, Mexico will also tighten eligibility requirements for its IMMEX program, which allows mostly foreign-owned companies to import raw materials and components into Mexico without paying taxes or tariffs to be finished, provided that all goods are exported out of Mexico during a certain time frame. A selection of finished products, like coats, jackets, suits, pants, dresses, sweaters, bed linens, curtains and towels are now temporarily excluded from the program, while a number of garment inputs, fabrics and yarns are still eligible for IMMEX treatment.
At the time, Ebrard said the moves would shield Mexico’s textile sector from unfair global competition, which has eroded domestic GDP by nearly 5 percent in recent years, costing the country’s apparel sector 79,000 jobs.
The IMMEX exclusions in particular were conceived as a means of curbing a practice that has now become commonplace: the subversive importation of finished apparel and textile products into Mexico as so-called raw materials, and the subsequent export those products to markets like the U.S. Because they came into Mexico under IMMEX, they’re spared from paying import duties and other taxes. Then, they enjoy duty-free benefits under the U.S.-Mexico-Canada Agreement (USMCA) or de minimis, which allows small parcels to be shipped directly to American shoppers.
A number of IMMEX firms are also engaging in another illegal practice: not exporting the full volume of goods produced using the foreign inputs imported under IMMEX. Ebrard said that nearly half of the companies currently using the program have failed to meet the export requirement, meaning that fabrics, components and illegally imported finished goods are being sold into the Mexican market, undermining the spirit of the trade program and allowing companies to evade paying their fair share of taxes.
Industry reactions
Not surprisingly, the announcement has IMMEX companies up in arms.
According to Mexico’s Confederation of National Chambers of Commerce, Services and Tourism of the United Mexican States (CONCANACO SERVYTUR), 52 companies operating in Mexico reported direct impacts from the heightened tariffs and changes to IMMEX in the days following the announcement, and they estimated that 100,000 direct and indirect jobs could be in imminent jeopardy.
Some companies told the group that they wouldn’t be able to support their operations in the near term with the shifts in import eligibility, as they don’t have other viable alternatives or national supply for the inputs affected by the decree.
Humberto Martínez Cantú, President of the National Council of the Maquiladora and Export Manufacturing Industry (INDEX), said IMMEX companies generate 9 million jobs out of the more than 22 million affiliated with the Mexican Social Security Institute. They have been “a key driver for the economic development of Mexico, contributing to exports and thousands of jobs.”
“At INDEX, we trust that the federal government will understand the relevance of this sector and we will work together to ensure that companies can continue operating, attracting foreign investment and generating value for our country,” he added.
Now, CONCANACO SERVYTUR is asking that the government grant businesses a three-month reprieve before the trade actions are implemented, and that it “do so gradually and to review it between the parties, tariff fraction by tariff fraction.”
“IMMEX companies have fulfilled their tax obligations, generating important contributions to the national economy, such as the export of products and the creation of direct and indirect jobs, reaffirming their commitment to economic development and the creation of formal employment in Mexico,” the group said.
Meanwhile, 3PLs are voicing concerns about the impacts of IMMEX restrictions. Last week, XB Fulfillment, which provides U.S. e-commerce and omnichannel brands with fulfillment and warehousing services, told customers it would no longer be able to import apparel into Mexico on their behalf.
Flexport CEO Ryan Peterson called the development a “nightmare scenario” for XB and its contemporaries in the logistics space—as well as the brands they serve.
Implications and motivations
Jorge Gonzalez Henrichsen, co-CEO of The Nearshore Co., which helps firms transfer their manufacturing operations into Mexico, said that he believes the Mexican government’s actions with regard to the textile sector are likely a part of a larger (if still under wraps) trade strategy.
“Both situations”—upping tariffs and revising IMMEX—“I think have to do with the pressure that the U.S. is imposing on Mexico,” he said, referring to incoming President Donald Trump’s recent tariff threats. “We don’t know the discussions that are going on in the background, but it seems to me too much of a coincidence that these events are happening all of a sudden in this direction.”
According to Henrichsen, the moves, while controversial with just about everyone in the textile and apparel supply chain, are likely as much a bid to appease the president-elect as a means of addressing the misuse of IMMEX. “I could imagine Trump saying, ‘Mexico, this is the direction I want you to go; it’s good, but you still have a long way to go,” he said.
The Nearshoring Co. leader said that Mexico is also likely seeking to address IMMEX abuse in earnest due to the growing opportunities afforded by a rising interest from U.S. brands in manufacturing closer to home.
Mexico is “no longer the textile powerhouse that it was once” in part because of China, which began to pull sourcing market share away from the country when it ascended to the World Trade Organization (WTO) in 2000. “Textiles usually is the bottom of the food chain for manufacturing, and as a country grows richer and more sophisticated, the first things to leave it are textiles. They go to a lower cost country, and I think that that happened to Mexico,” he explained.
Now that Trump is lashing out at the U.S.’ largest trading partner and North American neighbor for acting as a “back door” for China-made goods, it’s as good a time as any to address the issue, Henrichsen believes. “I think textiles is one of the quickest fixes, or the lowest hanging fruit, and so that’s why I think it’s no coincidence that that Mexico, suddenly, after Trump is threatening with tariffs, comes up with this.”
With reforms to apparel trade paving the way, trade referendums on electronics and auto could be next, he believes. The formal review of USMCA will take place in July 2026, and addressing challenges with IMMEX and U.S. concerns about China’s influence in the near term could lead to a more favorable outcome for Mexico when leaders finally sit down at the negotiating table, Henrichsen posited.
Widespread IMMEX abuse also threatens the Mexican government’s own tariff revenue, and that’s not something it’s likely to continue to abide. “The Mexican government is really preoccupied by the idea that what you’re bringing in you’re going to ship out,” he said. “Because if you don’t, you’re not paying the VAT import taxes, and you’re also not paying taxes when you sell the goods in Mexico again.”
Like Minister Ebrard said in his December announcement, 48 percent of IMMEX firms aren’t meeting export requirements, meaning that a large share of goods meant to be sold outside of the country are actually being consumed domestically and sold through illegal means.
While the government’s actions could mitigate this kind of activity, there’s no doubt that they stand to shake up the status quo of the textile and apparel supply chain—including American companies. Most of Mexico’s “maquiladoras”—factories that import raw materials and inputs to assemble or process into finished products—are operated by U.S. firms. While any company in the world can get an IMMEX permit, “there are over 6,000 maquiladoras, and the majority are U.S.-owned,” Henrichsen said. “I don’t think this is trivial.”
“I think there probably were intended consequences and unintended consequences” to the government’s trade actions, said Elise Shibles, who leads the Textiles and Apparel Practice and Forced Labor Practice at Sandler, Travis & Rosenberg, P.A. It will likely take time to unravel the true implications of the new rules over the coming weeks, and the Mexican government may be forced to iron out some kinks.
For one, Shibles believes the way the decree was written may pose problems for IMMEX companies that are attempting to bring in cut parts of garments for final assembly in Mexico. “The decree said that the IMMEX program still allows cut parts; 61-17 and 62-17 are the tariff classifications for parts of garments. But what this decree doesn’t take into account is that if you have all of the parts to a garment and you’re sending them somewhere, whether they’re assembled or unassembled, you classify that as a finished good.”
This means that cut garment parts sent from upstream suppliers in the U.S. into Mexico for assembly, for example, would actually be classified as finished garments, and would not be eligible for IMMEX duty deferral.
“I believe, based on reading the announcement, that this was inadvertent and not intended, but because they didn’t get the [Harmonized Tariff Schedule] codes right, I think that this probably poses a problem,” Shibles said. “The decree was made based on the tariff classification rather than the type of processing that would occur.”
Shibles also sees potential problems for U.S. companies when it comes to Mexico’s new tariffs on apparel and textile products. While products covered by USMCA are exempt from the tariffs, there are many apparel items that don’t qualify for USMCA, and now, they may be subject to the higher tariff rates.
“The rules of origin for apparel are yarn forward, plus sewing thread and elastics and all of these raw materials that have to come from within the [USMCA] countries,” she explained. As such, “more likely than not, a T-shirt that’s cut in the United States may not qualify for USMCA when it’s going down there to be assembled, or even if a finished U.S.-origin T-shirt is going to Mexico for screen-printing. The yarn or fabric may be coming from outside the United States,” she said by way of example. “That’s not set up as a duty-free USMCA supply chain.”
From heightened costs for American brands doing business in Mexico due to the new tariffs to a loss of business for IMMEX manufacturers and logistics firms (like those providing bonded warehouse space for e-commerce businesses shipping out of Mexico), Shibles foresees a number of hurdles for players throughout the supply chain.
These “unintended consequences” could prove majorly disruptive if they’re not clarified—and soon.
“I think that that folks are still trying to meet with their government to have conversations about all of that to make sure that those things are taken into account,” Shibles said.
