US pushes Mexico to cap Chinese parts in AI hardware

The Trump administration is pushing Mexico to accept new rules that would cap how much of an AI chip or server can be built from components sourced outside North America, according to a Wall Street Journal News Corp ↘ 3.58% report citing people familiar with the negotiations. The proposal aims to stop Chinese firms and other foreign companies from routing parts through Mexican assembly lines to sidestep U.S. tariffs on Chinese-made goods.wsj

AI Hardware Overtakes Automobiles

The category of AI hardware — encompassing chips, servers, and related equipment — has grown so rapidly that it has become Mexico's top export to the United States this year, surpassing automobiles. That surge reflects how manufacturers have shifted production south of the border to move AI equipment into the U.S. market while facing lower tariff exposure than Chinese-made equivalents.investinglive+1

Under the proposed rules-of-origin threshold, any firm that outsources final assembly to Mexico while sourcing components from China or elsewhere in Asia would need to reassess its supply chain. Ordinary semiconductors used in AI servers currently enter the United States largely tariff-free, a gap officials worry Chinese suppliers could exploit.investinglive

Broader USMCA Negotiations

The AI hardware proposal is part of a broader renegotiation of the United States-Mexico-Canada Agreement, which President Trump has repeatedly threatened to abandon. A fresh round of U.S.-Mexico trade talks is expected in Washington as early as next week, where officials are also likely to take up potential reductions in U.S. tariffs on steel, aluminum, and automobiles.globalsources+2

The bilateral track gained urgency after negotiations between the United States and Canada collapsed last month. Mexican President Claudia Sheinbaum spoke last week with U.S. Commerce Secretary Howard Lutnick to assess progress, and Economy Minister Marcelo Ebrard subsequently traveled to Washington to prepare for the next stage.globalsources

China Content Under Scrutiny

Washington's ambitions extend beyond AI hardware. Officials are also considering similar content thresholds for other goods, including medical equipment, to reduce Chinese content across supply chains routed through Mexico. Senator Bernie Moreno of Ohio, who has been consulting with Mexican industry groups, told the Journal his concern is "China using the Western Hemisphere to circumvent existing U.S. trade agreements by having goods labeled as Mexican-made when they are effectively Chinese in origin".wsj+1

The outcome of next week's talks could reshape investment decisions in Mexico's fast-growing electronics sector at a moment when both governments face political pressure to show results ahead of the November midterm elections.globalsources