The core of the US proposal is a hard cap on how much of an AI server, chip or related piece of hardware can be built from parts sourced outside North America, which would directly hit the assembly model many firms have used to route Chinese made components through Mexico. That threshold, once set, would raise costs and complexity for manufacturers who have shifted AI hardware production south of the border partly to keep goods moving into the US with lower tariff exposure than Chinese equivalents face. Chipmakers and contract manufacturers with cross border supply chains are the most exposed, since ordinary semiconductors used in AI servers currently enter the US largely tariff free. Any firm outsourcing final assembly to Mexico while sourcing components from China or elsewhere in Asia would need to reassess its supply chain if a strict North American content threshold is adopted.
---
Washington wants a hard limit on how much of an AI chip or server can be built from parts sourced outside North America.
Summary:
The United States wants Mexico to accept a cap on how much of an AI hardware product, including chips and servers, can be built from components sourced outside North America, the Wall Street Journal (gated) reported, citing people familiar with the negotiations. The proposal is designed to stop Chinese and other foreign firms from using Mexican assembly to sidestep US tariffs on Chinese made goods.
The rules of origin threshold under discussion would apply to a category of hardware that has expanded rapidly and become Mexico's largest single export to the US this year, overtaking automobiles. That growth reflects how much manufacturing capacity has shifted south of the border as companies look to keep AI equipment moving into the US market while facing lower tariff exposure than Chinese made equivalents.
The talks form part of a broader renegotiation of the US Mexico Canada Agreement, the trilateral trade deal President Trump has repeatedly threatened to walk away from. A fresh round of discussions between US and Mexican trade officials is expected in Washington as soon as next week, when the two sides are also likely to take up potential reductions in US tariffs on steel, aluminum and automobiles.
Washington is not limiting its ambitions to AI hardware alone. Officials are also considering similar content thresholds for other goods, including medical equipment, to reduce Chinese content across supply chains routed through Mexico. The gap in current tariff treatment is significant: cars, auto parts and advanced computer chips already face levies, but the more common semiconductors used in AI infrastructure can currently enter the US largely tariff free, leaving a route officials worry Chinese suppliers could exploit.
Senator Bernie Moreno of Ohio, who has been consulting with Mexican industry groups on the issue, told the Journal his concern is China using the Western Hemisphere to circumvent existing US trade agreements by having goods labeled as Mexican made when they are effectively Chinese in origin. He argued that any renewed trade agreement needs to prevent Mexico and Canada from becoming a channel for China to get around US trade restrictions.
If a strict North American content threshold is adopted, it would add a new layer of compliance for manufacturers and could reshape investment decisions in Mexico's fast growing electronics sector, at a moment when the broader USMCA relationship remains under active renegotiation.
This article was written by Eamonn Sheridan at investinglive.com.
Source: Investing Live - News
