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A US-Mexico tariff deal has stalled after Lutnick opposed deep cuts to the 25% auto and 50% steel and aluminum duties, while Mexico says talks still advance.
- Commerce Secretary Howard Lutnick opposes large cuts to the 25% auto tariff and the 50% steel and aluminum levies.
- Mexico's deputy trade minister says negotiations are still progressing.
- The talks run alongside the USMCA joint review and cover autos, metals and finished steel goods.
Lead
Progress toward a US-Mexico tariff agreement has slowed after Commerce Secretary Howard Lutnick objected to deep reductions in US duties on Mexican vehicles and metals, the Wall Street Journal reported on Thursday, October 15. Washington and Mexico City had been close to a deal that would lower US levies on automobiles, steel and aluminum in exchange for concessions from Mexico. The Mexican government disputes the view that talks have stopped.
What Happened to the US-Mexico Tariff Talks?
The negotiations have stalled over the size of the tariff cuts. Lutnick opposed significant reductions to the 25% tariff on Mexican automobiles and to the 50% duties on steel and aluminum. He also objected to lower tariffs on finished products made from steel and aluminum, a category that covers a large share of North American manufacturing trade.
Mexico's deputy trade minister, Luis Rosendo Gutierrez, said the negotiations are moving forward. A Commerce Department spokesperson said the department is in constant dialogue with Mexico on trade. Neither government has announced a breakdown in talks.
Why Does Lutnick Oppose Deeper Tariff Cuts?
The objection reflects the role of Section 232 tariffs in US industrial policy. These duties, imposed on national security grounds, are meant to protect domestic steel, aluminum and auto production. Cutting them for one partner weakens that leverage in negotiations with others, including Canada and the European Union.
Mexico has argued the opposite. Economy Secretary Marcelo Ebrard has called the 50% steel and aluminum rate unsustainable and said it has no justification. Mexican steelmakers are running at roughly 55% of capacity, and the auto sector, which supports hundreds of thousands of jobs, faces pressure from the 25% duty.
How Does the USMCA Review Affect the Talks?
The tariff discussions sit inside the broader review of the USMCA trade pact. A fourth round of review talks in Washington in early September ended without resolving two core disputes: auto rules of origin and the Section 232 tariffs. The main sticking point is the US demand for 50% US-specific content in vehicles, which Mexico rejects.
An interim tariff deal would give exporters near-term relief while the larger review continues. A stalled interim deal leaves manufacturers planning around current rates.
Market and Industry Exposure
Automakers with Mexican assembly plants, including General Motors (GM) and Ford (F), face the cost of the 25% auto tariff on cross-border vehicle and parts shipments. Metals-intensive producers face the 50% rate on inputs. Any cut would lower costs for plants that supply the US market, while a failed deal keeps duties at current levels.Investment decisions are also affected. Uncertainty over whether concessions will be permanent or renewable makes it harder for manufacturers to commit capital to Mexican capacity.
What Comes Next for Mexico and the US?
The next step is whether the White House backs Lutnick's position or accepts a narrower package. A smaller deal, with modest auto relief and a quota system for steel and aluminum, remains a possible compromise. The alternative is that talks fold into the wider USMCA review, which would extend the timeline.
Finished steel and aluminum products are the clearest test. If Washington holds the line there, Mexico's gains from any agreement shrink considerably.
Outlook
The US-Mexico tariff deal is not dead, but it has lost momentum. Lutnick's resistance to deep cuts on autos and metals has narrowed the room for agreement, while Mexico says discussions continue. The USMCA review, rules of origin and Section 232 duties will decide whether an interim agreement emerges in the coming months.
