The Trump administration wants to substantially increase the level of regional and U.S. content required in North American-built vehicles to qualify for lower tariffs under the U.S.-Mexico-Canada Agreement.
As initial talks between the United States and Mexico began this week over how to restructure the USMCA trade deal, U.S. negotiators are seeking 82% North American content in vehicles made regionally, with 50% of that value produced in the United States, four people familiar with the matter told Reuters.
The Wall Street Journal also reported on Friday that the Trump team’s priority is for half of the components and materials in cars come from the U.S. to qualify for preferential treatment under a revised trade deal.
The proposal — unveiled during negotiations in Mexico City on Thursday and Friday — had no provision for requiring any content from Canada, which is not represented at the talks, the Reuters sources said. But if the language were ultimately approved, it would appear to disadvantage Canada, given that such a large proportion of vehicle parts and materials would need to come from the United States.
The shift, if accepted, would be a major break from the current USMCA. It requires that 40% of the “core parts” value of North American passenger vehicle passenger cars be produced in high-wage jurisdictions, effectively the U.S. or Canada. That threshold is 45% for pickup trucks. Overall, vehicles must have 75% North American content to qualify for preferential treatment under USMCA.
U.S. Trade Representative Jamieson Greer said earlier this week he wanted to strengthen North American rules of origin “in a way that enhances U.S. content in these goods” to boost manufacturing in the United States.
The USMCA review, which is getting underway, is legally required to occur this year under the deal that was initially struck between the three countries in Trump’s first term, as a replacement for NAFTA, the North American Free Trade Agreement.
Trump stopped fully honoring the trilateral agreement last year when he imposed 25% taxes on imported goods from Mexico and Canada, including on autos and auto parts, with higher rates on certain materials needed for cars, including steel, aluminum and copper.
For autos, the administration later granted a tariff discount based on the U.S. content of USMCA-compliant vehicles and also offered relief for imported parts. But automakers and suppliers are still looking for further long-term clarity and relief under a potentially overhauled USMCA.
None of the Detroit Three automakers provided a comment Friday on the administration’s latest push for higher U.S. and regional content in the talks with Mexico. But General Motors Co. did point to a portion of its USMCA comments submitted to Greer last year, which said, in part, that GM supports stricter rules of origin for auto parts, so long as those changes “come with sufficient lead time,” are based on industry input, and recognize that some products aren’t available locally in the United States.
All three companies often point out that they have already committed to substantial U.S. supply chain investments under Trump, worth billions of dollars.
The White House didn’t immediately respond to a request for comment on Friday.
Complying with such stricter parts sourcing requirements, if they were approved, would probably be difficult to pull off for many models produced in Mexico, at least in the near term.
The Chevrolet Equinox SUV, for instance, sources 11% of its parts value from the U.S. or Canada, the Ford Maverick pickup has 25% from those two countries, and the Jeep Compass SUV has 36%, according to federal data.
A higher bar for U.S. parts and materials would create jobs in the United States and take them away from Canada and Mexico, said Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions LLC.
“U.S.-Canadian content is below 50% for a lot of vehicles,” he said. “The new level would have to raise the U.S content. If U.S.-Canadian content is not near 50%, that’s going to eliminate a number of Canadian jobs and Mexican jobs.”
The requirement could further increase already historically high new-vehicle prices, Fioranis added average transaction prices in April were $49,461, according to dealer services provider Cox Automotive Inc.
“Mexico supplies a lot of vehicles that are price-sensitive,” Fiorani said. “Raising the cost of those vehicles by requiring more expensive U.S. labor to be included would eliminate their competitiveness in the U.S. market. This is a strike against affordability of vehicles to Americans.”
With such a change in the business case for a lot of vehicles, there likely would be a negative impact on American buyers’ product selection.
Such a dramatic policy shift probably couldn’t happen overnight. A 50% U.S. content requirement likely would take three to four years to be fully rolled out alongside the elimination of products built in Canada and Mexico.
Still, Greer has indicated that forcing more vehicle and parts production activity stateside is central to the administration’s strategy.
“President Trump and the Trump administration really have made a strategic decision that we want to have as much auto manufacturing here in the United States as possible,” he said following a tour of a Stellantis NV plant in Warren in April, where he was asked about the upcoming USMCA talks. He said it is “really a domestic issue we’re trying to fix,” with the goal of more supply chains being relocated to the United States.
A recent letter from a group of seven automotive trade groups to Greer, the U.S. trade representative, emphasized that the existing USMCA framework is “still in its infancy” and suggested restraint in reworking a deal that is already benefitting the industry across North America.
“The new automotive rules of origin became effective in 2020, and the phase-in schedule for light vehicles was completed in July 2023. Consequently, the full economic effects of USMCA have yet to be realized,” the letter said.
It continues: “Even so, the United States has already benefited enormously from a strong, unified North American automotive ecosystem. Since the USMCA entered into force, the U.S. automotive industry has added 19 new production facilities and invested $335 billion dollars.”
The trade groups also pleaded for the Trump administration to work towards a trilateral deal with matching rules across the continent, rather than separate deals with Canada and Mexico.
Auto industry officials said it is highly likely that Greer would seek to negotiate the new rules of origin with Mexico and then present them to Canada as a take-it-or-leave-it proposition, Reuters reported.
The United Auto Workers union, meanwhile, is advocating for USMCA changes that would force more cars to be assembled domestically. The union last week laid out USMCA “demands” that include pushing automakers to build more cars domestically, and “real labor rights” that give workers more ability to push back on labor rights abuses, and stronger standards across the borders on worker pay, health and safety, and industrial strategy.
The talks between the U.S. and Mexico will pick back up on June 16 and 17, with a third round booked for the week of July 20.
It’s unclear how, or whether, USMCA talks with Canada might proceed; the trade relationship between the two countries has worsened since Trump returned to office in January 2025.
He and Canadian Prime Minister Mark Carney remain at an impasse over the U.S. president’s tariff actions and Carney’s decision to deepen his country’s trade relationship with China — especially in the automotive sector.
This article originally appeared on The Detroit News: U.S. pushes tougher American content rules for cars in USMCA review
Reporting by Luke Ramseth, Grant Schwab and Breana Noble, The Detroit News / The Detroit News
USA TODAY Network via Reuters Connect
