U.S. Hikes Tariffs on Mexico and the EU: What It Means for Business and What to Expect Next

On July 11, Mexico and the European Commission became the latest recipients of President Donald Trump’s letters announcing that “Liberation Day” tariffs on their exports to the U.S. will rise to 30 percent as of August 1.

For Mexico, President Trump’s letter cites the government’s failure to control drug trafficking organizations and the persistent trade deficit as reasons for the escalation but does not provide details on the scope of the levies. However, our understanding is that they will likely apply to non-USMCA-compliant exports currently covered by the 25% IEEPA tariffs, while leaving in place existing tariffs on steel, aluminum, automobiles, and auto parts.

For the EU, the announcement marks President Trump’s boldest tariff move yet against America’s transatlantic allies, covering a wide range of industrial goods, autos, and consumer products. While the EU had initially dismissed the idea of a UK-style deal, it had made efforts over the past week to secure exactly that. This weekend’s news will be a bitter blow. There will undoubtedly be calls for the EU to escalate, but leaders will need to tread carefully to preserve U.S. support for Ukraine.

European Commission President Ursula von der Leyen issued a statement stressing the EU’s commitment to “dialogue, stability, and a constructive transatlantic partnership,” while warning that the bloc “will take all necessary steps to safeguard EU interests, including the adoption of proportionate countermeasures if required.” French President Emmanuel Macron and Italian Prime Minister Giorgia Meloni echoed these sentiments, underlining the EU’s readiness to intensify negotiations and its determination to defend European interests.

One key theme emerging from both the EU and Mexico is concern over rules of origin compliance and transshipment. According to all letters sent so far and to the recent trade agreement with Vietnam, transshipped goods will be subject to the highest tariff rate. Mexico’s reliance on intermediate goods from China in many of its manufacturing exports points to more pressure and stringent U.S. oversight of rules of origin compliance and of potential transshipment of finished goods. For the EU, similar scrutiny is expected, particularly in sectors such as autos and machinery, where Chinese components are integrated into European supply chains.

Despite increasing domestic political and nationalist pressures, Mexican President Claudia Sheinbaum is holding firm on her cool-headed approach to engagement with Trump, avoiding escalation and stating that she is confident that agreements can be reached before the deadline. An interagency team led by the Secretary of Economy was meeting with U.S. counterparts at the White House hours before the letter was made public, seeking progress on a comprehensive bilateral understanding encompassing trade, security, and immigration.

We expect this will continue to be the Sheinbaum administration’s approach over the next two weeks, while at the same time rallying business leadership support for its industrial policy and investment strategy. Stabilizing the economic relationship as much as possible by preserving tariff-free access for USMCA exports and reaching a basic framework for security and border cooperation remains President Sheinbaum’s key objective.

From Brussels, leaders across member states – including Germany, France, Italy, Spain, the Netherlands, and Ireland – are backing the European Commission’s lead while preparing internally for potential countermeasures. We expect sector-specific concerns, particularly from the German automotive industry and French luxury goods producers, will shape the EU’s negotiating strategy. While some within the European Parliament are calling for swift retaliation, including exclusion of U.S. firms from EU public contracts, most national governments are focused on maintaining a unified front and avoiding outright escalation.

Amidst ever-shifting tariff goalposts for U.S. partners and allies, companies should continue to expect high levels of uncertainty and unpredictability. Real-time intelligence on trade policy developments in Washington, Brussels, Mexico City, and other key capitals has never been more critical.

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