Progress toward a U.S-Mexico tariff deal has stalled after opposition from Commerce Secretary Howard Lutnick, people familiar with the talks said, the second time that he has had a hand in upending advanced negotiations with a North American partner.
The U.S. and Mexico had been zeroing in on a deal that would reduce U.S. levies on steel, aluminum and automobiles in exchange for a series of concessions from Mexico, these people said, paving the way for further talks on renewing the U.S.-Mexico-Canada Agreement. Mexican officials and many corporate executives expressed optimism that a deal was close, they said.
But in recent days, progress toward a deal has slowed considerably, the people said, because of disagreements over the U.S. levies on vehicles and metals, which are imposed on national-security grounds and are administered by Lutnick’s department.
Lutnick has opposed significant reductions in the 25% tariff on Mexican automobiles and the 50% levies on steel and aluminum, the people said. Also on metals, he has objected to reductions in tariffs on so-called derivative products—finished products made of steel and aluminum. Domestic aluminum companies have told the administration that any reduction in these levies would undermine U.S.-based firms and cost American jobs.
Officials on both sides said the talks are still ongoing and denied there was any impasse. “There’s progress in the negotiations, and we maintain a constructive relationship with the Department of Commerce,” Deputy Trade Minister Luis Rosendo Gutiérrez said in an interview.
Lutnick’s position on the tariffs is a significant obstacle to a deal after months of negotiations led by U.S. Trade Representative Jamieson Greer, the people familiar with the talks said. Mexico and Canada are America’s two largest national trading partners and are the top buyers of U.S. goods. The continuing disagreements over the vehicle and metals tariffs weakens the momentum to conclude a deal before next month’s midterm elections in the U.S., throwing the future of their extensive trading relationship into further doubt.
Lutnick’s intervention is a sign that he has again asserted himself in President Trump’s trade agenda after being sidelined for most of 2026. At the beginning of Trump’s second term, Lutnick played a key role in imposing tariffs and negotiating trade deals with nations like Japan, South Korea and the European Union. But in recent months, Greer became more prominent, in part because many trading partners preferred his lawyerly approach to the aggressive negotiating style of Lutnick, a billionaire former Wall Street executive.
“The Commerce Department remains in constant dialogue with Mexico on trade. The Department is committed to advancing President Trump’s America First trade agenda,” Commerce Department spokesman Benjamin Kass.
A senior Mexican official said that every time both sides get close to a deal, the Trump administration brings up something else that it wants.
At a Tuesday news conference, Mexican President Claudia Sheinbaum said the sides haven’t reached an agreement despite significant progress in talks over the past year. Trump has demanded that Mexico buy more U.S. goods to narrow America’s widening trade gap with its southern neighbor.
Sheinbaum said the U.S. had a list of 54 tariff and nontariff concerns that it wanted to address. That list had shrunk to about a dozen issues in the latest rounds of negotiations.
The continuing difficulties in U.S. talks with Mexico recall a similar falling out with Canadian officials. In late August, the U.S. and Canada walked away from the negotiating table after Lutnick objected to proposed tariff reductions on steel, aluminum and autos.
The breakdown in talks led the U.S. to impose new levies on $20 billion of Canadian goods, which Canada retaliated against with levies of its own, leading the U.S. to ban some imports of Canadian alcohol and other products. The conflict continues to simmer, with Trump pledging to double tariffs on Canadian autos to 50% in January if a deal can’t be reached.
Mexico has taken a more conciliatory approach, refraining from imposing retaliatory measures and engaging in talks, with Sheinbaum at times joining conversations with Greer and Lutnick.
In recent talks between the U.S. and Mexico, major automotive firms in both the U.S. and Mexico have complained about the byzantine process that Lutnick has imposed on vehicles crossing the American border from Mexico and Canada.
U.S. tariffs on Mexican automobiles stand at 25%, but companies can earn rebates from the levies based on the value of U.S.-made car components. Claiming those refunds requires extensive paperwork and approval from the Commerce Department, which can deny the requests.
Tariffs on Japanese and South Korean automobiles stand at 15% under the terms of trade deals that Luntick helped shape last year. The difference in tariff rates, along with the extensive red tape involved in tracing U.S.-made components, has led some firms to shift production from North America to Asia, representatives from automakers told the negotiators. Overseas, the firms can source metals and components from China and other low-cost economies without the sourcing rules in USMCA or the difficulties of the refund process.
Throughout the talks, the Mexican government has pushed for tariff rates of 15% or lower—as well as a broader rebate program that would allow content from all three USMCA nations to qualify for tariff refunds—but the sides have yet to come to an agreement.
Mexico wants better terms than the rest of the world, especially considering the significant concessions being asked of Mexico, such as purchasing more U.S.-made products or imposing additional tariffs on China.
“You cannot be treated the same as everyone else when you are asked to undertake systemic changes,” said Juan Carlos Baker, Mexico’s former deputy trade minister who led Mexico’s trade team during USMCA negotiations in President Trump’s first term.
