Mexico Seeks Tariff Relief as Border Drone Curbs Loom

Mexico offered 11 automakers with production facilities in the country a targeted tax break as it seeks lower U.S. tariffs on cars and steel. Washington is also preparing a drone restriction along its side of the border. The moves put jobs, production and security under national authorities’ control, but tariff talks have produced no announced deal.

Trade Talks, No Deal Yet

Economy Secretary Marcelo Ebrard told committees of Mexico’s Chamber of Deputies on Friday, Oct. 16, that Mexico expected U.S. tariff reductions on steel and vehicles “in the coming weeks or months.” He named no signed agreement, date or target steel rate. The United States currently applies duties of 25% on Mexican cars and 50% on steel and aluminium, including finished goods made from them, under national-security rules known as Section 232.

Mexico wants the car tariff capped at 15%, the rate the United States applies to vehicles from South Korea. Ebrard said model-by-model discounts for regional content already keep the sector’s average payment well below 10%. Expansión reported Mexico wants to keep those discounts, while El Universal described a proposal to cut the tariff from 25% to 15% regardless of regional content.

Ebrard cited General Motors, which builds in South Korea, Mexico and the United States, and argued that tariffs misaligned across those countries hurt U.S. brands as well as Mexico. He contrasted Mexico’s request with Japan’s agreement to invest US$500 billion in the United States: Mexico wants a lower car tariff, but wouldn't make an investment of that size.

The Wall Street Journal reported, citing people familiar with the talks, that U.S. Commerce Secretary Howard Lutnick resisted deep cuts to car and metals duties. Mexican outlets relaying the report said officials in both countries denied a deadlock. Ebrard said Lutnick had never told him he opposed reducing Section 232 duties. He called him “a good friend” and said talks continued every day and were “not interrupted.” Jamieson Greer is the U.S. Trade Representative.

Mexico’s Conditional Parts Waiver

Mexico’s Economy Ministry said Friday that only 11 light-vehicle makers with productive facilities in Mexico could use a zero-tariff waiver for car-assembly parts. The decree took effect Oct. 14 and runs for five years. It changes customs line 9803.00.01 from a 10% import tariff to no tariff for the covered parts.

The ministry said the measure aims to protect jobs, attract investment and move production lines from abroad to manufacturers already operating in Mexico. Economy Secretary Marcelo Ebrard and President Claudia Sheinbaum co-signed the decree; Finance Secretary Édgar Amador Zamora also signed it on Friday, Oct. 9. The ministry hasn't named the 11 companies or specified which firms have applied.

Importers need bonded-warehouse authorization under Mexico’s Customs Law and prior ministry permission for every import. Guidelines will set minimum output of complete vehicles in Mexico and caps on imported parts as a share of output. The SAT tax agency and ANAM national customs agency will carry out controls. Companies must report vehicle identification numbers and provide data tracing the imported parts.

The ministry says the waiver is intended to move production beyond assembly toward full car manufacturing, increase local content gradually and reduce imports of finished vehicles from countries without a Mexican trade treaty. It cited Sheinbaum’s May announcement that General Motors would move two production lines from China to Mexico, starting with assembly and gradually adding local content. In 2025, 0.01% of Mexico’s automotive imports used the customs line covered by the decree. The ministry hasn't estimated vehicles covered or tariff revenue forgone. The waiver doesn't change the separate tariff of up to 50% on many passenger cars from countries without a trade deal, including China.

Border Security and Sovereignty

The United States announced a restriction on unauthorized drone flights from the ground to 400 feet above ground within one nautical mile north of the Mexico border. The Transportation, War and Homeland Security departments said it aimed to counter cartel drone threats, reduce risks to border operations and protect federal personnel and facilities. The restriction applies north of the border and, as announced, places no new limit on Mexican airspace.

War Secretary Pete Hegseth said, “our warfighters will shoot down any cartel drone that threatens America’s sovereignty.” Transportation Secretary Sean Duffy said the action doubled down on the pledge to secure the southern border, while Homeland Security Secretary Markwayne Mullin said it would help counter cartel drone threats.

The Federal Aviation Administration publishes the restriction as a notice to air missions, or NOTAM; the announcement cited no executive order. DroneXL described three notices as taking effect at 00:00 UTC on Oct. 20, or the evening of Oct. 19 along the border, and running through Oct. 19, 2027. Infobae in Mexico also reported an Oct. 19 start and one-year term, while the departments’ announcement described the restriction as effective Friday and gave no end date.

U.S. Northern Command said on Sept. 4 that its border task force had defeated more than 300 unmanned aircraft in 2026, including more than 100 in August. Mexico’s defense ministry said U.S. forces downed three drones inside U.S. territory on the nights of Aug. 25 and 26, after Northern Command notified the Mexican army. Mexico described them as commercial drones used by migrant smugglers to monitor authorities and called the incident part of “mirror operations,” in which each country’s forces act on its own side. No statement from President Claudia Sheinbaum’s government on the new restriction had surfaced by the morning of Oct. 17.