How U.S. Tariffs on Mexico Are Hurting American Businesses—and What You Can Do About It

Last Updated on April 10, 2025

Tariffs That Bite Both Ways

You’d think tariffs would protect American companies—level the playing field, boost domestic jobs, and keep things “Made in the USA,” right? That’s the political pitch. But in reality? It’s not so clean cut. More often than not, tariffs on Mexico are hurting American businesses, especially those that rely on cross-border supply chains to stay lean, agile, and competitive.

You’ve got manufacturers in Ohio, Texas, and Michigan who rely on parts made in Mexico, only to get slapped with duties on components they helped design. And here's the kicker: it’s not just multinationals feeling it. Small manufacturers are squeezed hardest. You can't eat those costs forever.

Wait—Aren’t Tariffs Supposed to Help US Manufacturing?

Sure, in theory. But the theory doesn’t pay for payroll.

Tariffs were designed to pressure foreign governments (like Mexico’s) into trade compliance or policy alignment. But what they actually do is act like blunt instruments. Instead of punishing the bad actor, they often punish the supply chain—which, by the way, includes American companies.

Let me explain: When you raise tariffs on imported goods from Mexico, you're not just targeting finished products. You're taxing raw materials, intermediate goods, and components U.S. factories use to complete assemblies. It’s like taxing yourself while punishing your neighbor.

Any negative impact that you would expect from the tariffs being applied to other countries, especially those in Asia, would be much larger if they are applied to your direct neighbors. Not only is there more trade with our close partners, but that trade may be on specific items that are very hard to substitute because they are integrated into these very long supply chains.

The car manufacturing industry is a good example. If you cut Canada from the supply chain in the U.S., you’ll have fewer parts for producing cars. Even the parts that were produced in the U.S. are not going to be useful because you don’t have the parts that are being produced in Canada. It's not easy for firms to substitute, for example, part of an engine that is only used by Ford on certain models; it will take a few months at least. The evidence that we have is that in the short run, those disruptions can be very severe. - The University of Chicago

The Real-World Fallout: What American Companies Are Seeing

Companies report:

• Higher production costs. A $2 gasket now costs $3.25 with duties and delays.
• Worsening lead times. Border checks and paperwork pile up, slowing delivery.
• Contract chaos. Fixed-price deals with buyers get thrown off course by unexpected costs.
• Lost trust. Partners look elsewhere -- sometimes permanently.

And it's not just about numbers on a spreadsheet. These costs ripple out. Plants delay expansion. Employees work fewer shifts. Equipment sits idle. One tariff can unravel months of planning.

As companies face higher costs due to the tariffs, they are expected to pass that on to the consumer in the form of higher prices. Economists project that the tariffs will lead to a $3,789 decline in disposable income for the average US household.

US companies may also be forced to cut costs by shrinking their labor force, potentially leading to an increase in unemployment. - VOX

Cross-Border Supply Chains: Fragile, Fractured, and Frustrated

You know what makes North America competitive? The tight-knit supply chain. U.S. designers, Mexican fabricators, Canadian processors—everyone’s playing their part.

But tariffs tear that apart.

A component gets built in Monterrey, shipped to Laredo, assembled in Chicago, and then sent to California for final packaging. That’s not some exotic setup—it’s normal. And it will work-until tariffs throw sand in the gears.

Companies that spent years building lean, efficient systems now face delays and unpredictability. And in manufacturing, unpredictability kills. Customers expect delivery in days, not weeks.

Small & Mid-Sized U.S. Companies: The Unexpected Casualties

Let’s not sugarcoat this. Big corporations can absorb short-term hits or shift their operations. They have compliance teams, customs brokers, and legal firepower.

But small U.S. businesses? Not so lucky.

These are machine shops, electronics assemblers, and textile manufacturers who have spent years nurturing relationships with Mexican suppliers. A sudden tariff means they will either raise prices (and lose business), eat the costs (and hurt margins), or stop production (which nobody wants).

And yet, they're barely in the conversation when these policies get drawn up.

The Hidden Costs No One Talks About

There’s a whole layer of pain that doesn’t show up on balance sheets:

• Lost momentum. Projects stall. Confidence shakes.
• Supplier attrition. Longtime partners start ghosting you—or worse, shifting to Asia.
• Workforce instability. When orders dry up, so do shifts.
• Mental bandwidth. Let’s be real: Navigating tariffs eats up time and headspace that should go to product development or sales.

And here's another twist: many U.S. companies set up operations in Mexico to avoid offshore risks in Asia. But now they're penalized for keeping production close to home. It’s backwards.

Why Relocating to Mexico Still Makes Sense (Despite It All)

Here's the irony: even with tariffs, Mexico remains one of the smartest choices for U.S. manufacturers.

Why? Proximity, labor costs, quality, and cultural alignment. Plus, Mexico still has dozens of free trade agreements, not just with the U.S., but globally. That means access to markets without ocean-sized headaches of long shipping lanes or language barriers.

Smart businesses aren’t ditching Mexico—they’re just getting smarter about how they manufacture there. That means working with local partners who understand the shifting policy landscape, know how to navigate import/export rules, and can help optimize operations despite red tape.

Tariffs might be a nuisance, but with the right setup, they don’t have to be fatal.

Wrapping It Up: Don’t Let Policy Sabotage Your Business

The truth is, tariffs on Mexico are hurting American businesses more than they’re helping them. They disrupt supply chains, inflate costs, and hit small companies hardest—often without real benefit.

But this isn’t a doom story—it’s a wake-up call. If you're running or planning to start a manufacturing operation in Mexico, factor in these challenges. Not just politically, but logistically, financially, and operationally. The smartest move isn’t to pull back. It’s adapting faster. to factor in these challenges. Not just politically, but logistically, financially, and operationally. The smart move isn’t pulling back. It’s adapting faster.

FAQs on Tariffs on Mexico Hurting American Businesses

Why are U.S. tariffs on Mexico hurting American businesses?
Because many American companies rely on materials and components made in Mexico. Tariffs raise those costs, leading to higher prices and supply chain disruptions.

Are there ways to avoid tariffs while manufacturing in Mexico?
Yes, some strategies include using IMMEX or shelter manufacturing programs, classifying goods accurately, and partnering with local compliance experts.

Do tariffs apply to all goods from Mexico?
Not always. It depends on the product category, trade agreements in effect, and how the item is classified under customs codes.

Is nearshoring to Mexico still worth it despite tariffs?
Absolutely. The cost and logistical benefits still outweigh the downsides for most manufacturers—especially compared to Asia-based production.

How can I protect my business from future tariff changes?
Work with a cross-border logistics or manufacturing partner who understands trade compliance. Flexibility and foresight are your best defenses.