Trump Wants To Change How Cars Are Made Under USMCA Trade Deal

Washington has officially indicated it will shift the parameters of North American vehicle manufacturing, confirming that the Trump administration is refusing to sign a clean, 16-year extension of the U.S.-Mexico-Canada Agreement.

By letting the July 1 renewal deadline pass without confirmation, the U.S. federal government has triggered a 10-year countdown on the trade pact, locking the three nations into a cycle of rolling annual reviews. The deal technically remains fully in force with its current tariff exemptions through July 2036

Under the current rules, any country can withdraw from the deal entirely with six months' written notice—a provision the White House maintains to leverage deeper concessions from Ottawa and Mexico City.

The friction preventing a clean signature centers on the rules of origin that dictate how much of a vehicle must be built within regional borders to avoid the administration's 25 percent tariff structure.

What USMCA Content Rules Currently Require

The current USMCA framework mandates that 75% of a vehicle's components originate in North America to qualify for duty-free treatment. That percentage exceeds the 62.5% threshold set under the previous North American Free Trade Agreement. Automakers must also source 70% of their steel and aluminum from the three member nations.

Labor provisions add another layer. Companies must produce 40-45% of vehicle content in facilities paying workers at least $16 per hour. These provisions aimed to prevent manufacturers from shifting all production to lower-wage Mexican plants.

Proposed Changes Under Discussion

Trade representatives from all three nations are meeting to review compliance mechanisms and discuss whether current thresholds achieve their intended goals.

The U.S. is pushing to increase the regional content requirement to 82 percent while simultaneously inserting a strict mandate requiring that at least 50 percent of the parts originate specifically from U.S. factories, explicitly excluding Canadian or Mexican labor from that sub-total

The negotiations also address how automakers calculate regional content, particularly for electric vehicles. Battery components and semiconductors present challenges under existing rules because many raw materials come from outside North America.

Impact on Domestic Manufacturing

Stricter content requirements would force automakers to make immediate supply chain decisions. Companies currently operating near the 75% threshold would need to replace foreign-sourced parts with North American alternatives or pay tariffs ranging from 2.5% for passenger vehicles to 25% for light trucks.

General Motors, Ford, and Stellantis maintain extensive manufacturing networks across all three countries. Toyota, Honda, and Nissan have also invested billions in North American plants over the past decade. Newer market entrants, particularly electric vehicle makers, face greater challenges meeting content thresholds because battery supply chains remain heavily concentrated in Asia.

The Alliance for Automotive Innovation, representing most major automakers, has stated that current rules already strain supply chains. The trade group argues that few suppliers can quickly scale production to meet higher domestic content demands.

What This Means for Vehicle Prices

Compliance costs flow directly to buyers. When manufacturers replace lower-cost imported parts with more expensive North American components, those costs appear in vehicle pricing. Industry analysts have not quantified potential price increases because proposed rule changes remain unspecified.

Tariff costs also reach consumers. If an automaker cannot meet content thresholds, it pays duties on imported vehicles that dealers typically pass through to buyers. A 2.5% tariff on a $35,000 sedan adds $875 to the purchase price.

USMCA Timeline and Next Steps

USMCA includes a joint review process scheduled for 2026. Current negotiations may produce interim guidance before that formal review. Trade representatives have not announced a deadline for concluding current talks.

Congressional trade committees in the United States continue monitoring the negotiations. Some lawmakers have pushed for stricter enforcement of existing rules before adding new requirements. Others argue that domestic manufacturing deserves stronger protections even if compliance raises vehicle costs.

Canada and Mexico both pushed for a seamless renewal last month, but they must now prepare for the next round of formal bilateral negotiations scheduled for the week of July 20 in Mexico City, where they will determine how to respond to Washington's specific content demands.

Become an AutoGuide insider. Get the latest from the automotive world first by subscribing to our newsletter here.