Overview
- This week U.S. negotiators formally proposed in Mexico City that vehicles qualify for USMCA tariff relief only if about 82% of their parts are North American and at least 50% of value comes from the United States.
- Canada was excluded from the initial bilateral U.S.–Mexico talks and USTR has scheduled further U.S.–Mexico rounds on June 16–17 in Washington and a July session in Mexico City.
- The U.S. proposal follows a 25% U.S. auto tariff imposed in April 2025 and would embed a country‑specific preference into rules of origin that previously treated North America as a single bloc.
- Automakers and analysts warn the change would force major sourcing shifts, likely raise production costs and consumer prices, and could redirect or freeze investment across the region.
- Enforcement would be difficult because government data and measurement methods currently combine U.S. and Canadian inputs, and Mexico and Canada are exploring trade diversification in response.