Trade, Taxes, and Tensions: The latest US Tariff Move
On first glance, the latest US tariff policy (and no doubt not the last) is as seemingly simple as it is logical: whatever tariff a country imposes on American products, the US will return in kind, out of “fairness,” naturally. For Mexico, this would seem quite positive. As it has a free trade treaty with the US, for the most part it does not charge tariffs on US exports, and thus on this logic would not face tariffs on its exports to the US. Game, Set, match to Mexico (and Canada).
But it turns out the proposal is not quite this simple, nor necessarily that logical, with much devil in the still unknown detail. For example, for purposes of this policy, the US says it may consider any value added tax (VAT, a standard consumption tax in Mexico and most of the world) on US exports as a trade barrier. If Washington follows through on this logic, much international trade could suddenly become more expensive. Presumably the argument is that exporters cannot easily deduct any VAT paid on the final sale, as do not have many Mexican input costs. That said, VAT is an end-tax that everyone pays (local and foreign exporters), and use of tax planning, tax treaties, local subsidiaries can mitigate the impact of not being able to deduct input costs for exporters.
Sales tax in the US differs from VAT because it is imposed at the state or local, not federal level, and is only charged at the final sale to consumers, with no deductions for input costs. Each state sets its own rate, with local variations. For example, Texas has no state income tax but a higher sales tax (8.6%), while California has lower sales tax (7.5%) but state income tax. Meanwhile, companies exporting to the US don’t pay VAT, but buyers pay the sales tax. So the US administration is arguing simplistically that sales tax does not discriminate against exporters in the way VAT does.
The exact tariff rates for each country and their implementation timeline have yet to be disclosed, and probably not even determined by the US. Further complicating matters, the American government says it will consider a range of trade, fiscal, and monetary barriers it deems sufficient grounds for tariff retaliation. (Mexico does not offer many industrial exporters subsidies so may not be too affected by this, although favorable tax treatment of maquiladoras could be considered a subsidy).
Under more normal circumstances, the 2026 USMCA review would be the perfect opportunity for the three countries to negotiate these matters – but then, these are clearly not normal circumstances. Moreover, at its core, this isn’t only about trade: it’s about leverage. The US is flexing its economic muscles, as Trump 47 drives a much harder bargain than Trump 45. Mexico needs to continue to play its cards wisely: pushing back just enough to protect its industries without triggering a full-blown trade dispute.
Marcelo Ebrard, Mexico’s Secretary of the Economy, will travel to Washington this week to discuss potential tariffs with Howard Lutnick, President Trump’s nominee for Secretary of Commerce. Additionally, a meeting is being arranged between Mexico’s security cabinet, led by Omar García Harfuch, Secretary of Security, and US officials, President Claudia Sheinbaum revealed during her Monday morning press conference.
Reemergence of Mobile Registry Sparks Privacy Fears
President Claudia Sheinbaum has introduced a General Law on the National Public Security System as part of her 2024-2030 National Security Strategy. Among other provisions, the law would create a National Mobile User Registry, managed by the Digital Transformation Agency, requiring telecom providers to register all users and deactivate unregistered lines (except for emergency services), and granting law enforcement full access to user data, with the purpose of fighting kidnapping and extortion.
While framed as a security measure, the plan raises serious privacy concerns. Critics argue it could lead to mass surveillance, data misuse, and potential government overreach. In 2021, then-President Andrés Manuel López Obrador proposed a similar registry to combat crime. However, a year later, the Supreme Court declared the initiative unconstitutional, ruling that it violated the right to privacy and the protection of personal data.
With the future changes in the Supreme Court’s composition, it is unlikely that legal challenges could block, or at least limit, Sheinbaum’s new proposal, leaving concerns over privacy and civil liberties largely unanswered.
Sheinbaum’s Anti-Nepotism Reform: A Tough Pill to Swallow?
President Claudia Sheinbaum has urged Congress to approve her anti-nepotism reform in time for the 2027 midterm elections, when Mexico will renew its Chamber of Deputies, 16 governorships and many more local congresses legislatures and municipal councils. The proposal bans relatives of outgoing officials from running for office, targeting the long-standing practice of political families securing power through their children or spouses. This measure will impact all parties, particularly at the state level, where nepotism is most prevalent.
Sheinbaum introduced the initiative on February 5, alongside another reform to eliminate re-election for legislators and mayors, who currently serve three-year terms with the option to run for one additional term. If approved, this second reform would take effect in 2030.
The reform challenges a deeply ingrained political tradition in Mexico, but its success will depend on Congress—and whether politicians are willing to block a system that has benefited many of them.
The Supreme Court Steps Back, the Electoral Tribunal Takes Over
Mexico’s Supreme Court has effectively accepted the government’s judicial reform. With a majority of seven votes in favor and three against, the plenary session (SCJN) ruled in effect that the Electoral Court (TEPJF) cannot delay the judicial elections. The justices stated that any rulings by the Superior Chamber on injunctions (amparos) and suspensions granted by federal judges are merely advisory opinions and agreed that electoral magistrates have no authority to review them.
The Court made it clear that suspensions don’t apply to constitutional reforms or electoral matters, but it also conveniently avoided ordering the INE or the Electoral Tribunal to abide by past suspensions. Meanwhile, the INE ordered that the list of 4,224 candidates for the judicial election must be published, even with errors and missing information, in the Official Gazette of the Federation.
With no more legal challenges standing in the way, Mexico’s first-ever judicial elections will move forward as planned in 2025.
Contact:
Laura Camacho
Executive Director Miranda Public Affairs
laura.camacho@miranda-partners.com
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