Trump's imposition of tariffs on chips brings varying prospects for Mexico's burgeoning semiconductor sector
The proposed 100% tariff on semiconductor imports in the United States is expected to have a significant negative impact on the semiconductor industry in Mexico, particularly in key states like Jalisco, which is home to a substantial part of Mexico’s semiconductor manufacturing and supply chain.
Key points regarding this impact are:
- The 100% tariff would dramatically increase the cost of semiconductor imports into the U.S., creating a massive price shock for chips made or assembled in Mexico and then shipped to the U.S. market. Since Mexico is a major exporter of semiconductors and microchips to the U.S., this policy could sharply reduce demand for Mexican semiconductor exports or force companies to absorb costly tariffs.
- Mexico’s semiconductor clusters, particularly in Jalisco, are integrated into North American supply chains supplying U.S. electronics and automotive sectors. This tariff would disrupt those supply chains, potentially driving companies to reconsider their production location strategies to avoid tariffs.
- The tariff policy exempts companies that commit to manufacturing chips in the U.S., encouraging firms to invest in American fabs. While large companies like Apple (which has announced a $600 billion U.S. expansion) and TSMC (with U.S. fab investments) may be shielded, Mexican-based manufacturers with no or limited U.S. footprint might face severe challenges maintaining market access.
- Smaller and medium-sized semiconductor firms in Mexico could be particularly vulnerable, as they may lack the capital to quickly shift production to the U.S., unlike multinational giants who can leverage multiple facilities.
- This policy could lead to higher chip prices overall, as exemplified by TSMC’s 30% price hikes on chips produced in Arizona due to capacity and labor costs. The increased costs would ripple through Mexican supply chains connected to U.S. markets.
In summary, this tariff is likely to pressure the semiconductor industry in Mexico's Jalisco region by increasing costs for exports to the U.S., disrupting existing North American supply chains, and incentivizing relocation or expansion of production within the United States. The full impact will depend on how manufacturers adjust their operations and investments in response to these tariffs, with large multinational companies better positioned to adapt than smaller Mexican firms.
However, Mexico is analyzing the impact of the proposed tariff and it is most likely that they will not be affected, or could even benefit under the USMCA treaty. In October 2024, the United States Embassy in Mexico and Canieti presented a joint Master Plan for the Development of the Semiconductor Industry in Mexico for 2024 to 2030. Additionally, Silicon Valley companies plan to invest US $890M in Jalisco in 2025, and the electronics manufacturing services company Flex plans to invest $86 million in a microchips research center in Guadalajara.
Reports about the proposed tariff and its potential impact on Mexico’s semiconductor and automotive industries are from La Silla Rota, Reuters, El Sol del Centro, El Informador, and The Hill.
[1] La Silla Rota [2] Reuters [3] El Sol del Centro [4] El Informador [5] The Hill [6] Unnamed sources [7] Mexican Business Council for Foreign Trade (Comce Occidente) [8] National Union of Auto Parts Industry Workers (SNTIA) [9] Intel, Infineon, Skyworks, and QSM Semiconductors [10] Qualcomm and other firms [11] Foxconn [12] United States Department of Commerce [13] United States Embassy in Mexico [14] Canieti [15] USMCA treaty [16] Mexican states with the highest sales of semiconductors [17] October 2024 announcement by Foxconn [18] 2024 as the main destination of Mexican semiconductor exports [19] US $466 million or 75% of Mexico's chip exports in 2024 [20] TSMC’s 30% price hikes on chips produced in Arizona [21] Apple’s $600 billion U.S. expansion [22] TSMC’s U.S. fab investments [23] Silicon Valley companies' US $890M investment in Jalisco in 2025 [24] Flex's $86 million investment in a microchips research center in Guadalajara.
- The proposed tariff on semiconductor imports in the United States is expected to have a significant negative impact on the semiconductor industry in Mexico, especially in states like Jalisco, due to the increased cost of imports, potential supply chain disruptions, and incentives for relocation or expansion in the U.S.
- The tariff would result in higher chip prices overall as exemplified by TSMC’s 30% price hikes on chips produced in Arizona, likely impacting Mexican supply chains connected to the U.S. market.
- However, despite these predictions, the Mexican government is analyzing the impact of the proposed tariff, and it is possible that Mexico may not be significantly affected or could even benefit under the USMCA treaty.
- In a positive development for Mexico's semiconductor industry, Silicon Valley companies plan to invest USD 890 million in Jalisco in 2025, and electronics manufacturing services company Flex plans to invest USD 86 million in a microchips research center in Guadalajara.
