Automakers warn cheapest vehicles could exit U.S. without USMCA renewal
Mexico has presented the counteroffer in response to a Trump administration plan requiring vehicles to contain 50% U.S. content to qualify for lower tariffs under the deal, according to people familiar with the talks. The current U.S. policy, imposed last year, charges a 25% tariff on the non-U.S. content of vehicles assembled in Canada and Mexico.
Under the Mexican proposal, the top-line tariff would drop from 25% to a lower figure — likely 5% or 10% — on North American vehicles that do not fully comply with the deal. The U.S. would apply tariffs only to vehicle components produced outside North America, meaning parts sourced from Mexico and Canada could qualify for duty-free treatment. Because the existing USMCA already requires 75% North American content for preferential treatment, the lower U.S. tariffs would ultimately apply to a quarter of a vehicle’s value or less, producing a lower final tariff on many models.
The Trump administration’s 50% U.S. content proposal would require considerably more U.S. parts than many vehicles built in Mexico contain today. Mexican negotiators have signaled openness to the concept of a U.S. content requirement but consider 50% too high, and many automakers have echoed that position. The Mexican government considers the 50% figure unworkable.
Some automakers have previously warned the administration they could pull their cheapest cars from the U.S. market if the USMCA is not renewed with significantly lowered tariffs.
Mexican negotiators have framed their proposal, in part, as a way to give U.S. Trade Representative Jamieson Greer a victory to take back to President Trump, who has repeatedly said he could abandon the agreement altogether, according to one person familiar with the talks. Telling Trump that a renewed deal would require more U.S. content in cars — even at a level below 50% — could help convince him that the agreement serves American workers, the person said.
Despite the dueling proposals, talks remain in early stages. Greer told lawmakers last month that discussions over renewing the USMCA are likely to stretch into next year. The U.S. and Mexico have held three rounds of USMCA talks, but formal negotiations have not yet opened with Canada.
Canadian negotiators have presented a similar automotive tariff plan to their U.S. counterparts, according to people familiar with the discussions, though it is not clear whether the U.S. will agree. Canadian officials are also pushing for the U.S. to ease existing tariffs on Canadian steel, aluminum, autos and lumber.
Trump has threatened an additional 50% tariff on $20 billion worth of Canadian goods — about 5% of U.S.-bound Canadian exports — if there is no breakthrough before Aug. 19. Those tariffs would apply even to goods that comply with the USMCA. The threat has accelerated trade talks between the U.S. and Canada, which had largely stalled since the fall.
Dominic LeBlanc, Canada’s minister in charge of U.S. trade, met with Greer on Tuesday — the third such meeting in as many weeks. Other Canadian negotiators have traveled to Washington in recent weeks to negotiate a deal that would stave off the threatened levies.
The Mexican proposal represents a concession from the USMCA text that took effect in 2020 and provided duty-free treatment for qualifying vehicles. Trump broke that paradigm last year by imposing tariffs on automobiles, steel, aluminum and other products from Mexico and Canada. Since then, Greer has insisted that any renewed USMCA would include some level of U.S. tariffs. Mexican negotiators have shifted their focus from seeking tariff-free treatment to ensuring levies on their products are lower than on goods from outside North America.
The U.S. Trade Representative’s office did not respond to a request for comment. The White House did not comment. The Mexican Embassy in Washington declined to comment. Gabriel Brunet, a spokesman for Canada’s minister in charge of U.S. trade, also declined to comment.