The Trump administration is reportedly working on a major overhaul of the rules that govern North American auto production. According to Reuters, Washington has asked Mexico to significantly increase the share of regional content required to obtain preferential access under the USMCA, the trade agreement that replaced NAFTA between the United States, Mexico and Canada in 2020.
US wants higher North American auto content under new USMCA plan
The proposal put forward by US Trade Representative Jamieson Greer would change the current rules of origin in two ways. The overall regional content threshold required to benefit from preferential tariffs would rise from the current 75% to 82%. More importantly, the plan would introduce an additional requirement under which at least 50% of the value of each vehicle would have to come directly from the United States. For heavy trucks, the regional content share would increase from 70% to 75%.
Canada’s position makes the negotiation particularly sensitive. According to Reuters, Ottawa did not take part in the bilateral talks and would not receive any specific quota for components produced on its own territory under the proposed new structure. Such a scenario would deeply alter the current USMCA framework, which gives a significant role to production in the high-wage areas of the United States and Canada. Today, those areas must account for at least 40% of the value of core components in passenger cars and 45% in pick-ups.
Industry insiders believe Greer could first reach an agreement with Mexico City and then present Ottawa with a final package, leaving Canada with little room to negotiate. If confirmed, that strategy could weaken the trilateral nature of the agreement and replace it with a network of bilateral deals shaped around US industrial priorities.
The impact on carmakers would be significant. The North American auto industry has relied for decades on deep production integration, with vehicles and components crossing borders several times before final assembly. A change of this scale to the rules of origin would force groups such as General Motors, Ford, Stellantis, Toyota and Volkswagen to review supply chains, multi-year contracts, plant locations and cost structures. This would come at a time when the sector is already investing huge sums in the transition to electric vehicles.
The dossier goes beyond the auto industry and also touches steel, aluminium and what Washington defines as economic security issues. The administration wants to prevent China and other third countries from using Mexico as an indirect entry point into the US market. It is also seeking stricter rules for calculating local content in high-value components, after Mexico and Canada won a dispute in 2023 before the USMCA arbitration panel. The Office of the US Trade Representative has confirmed its intention to reduce the trade deficit with Mexico and strengthen American supply chains.
The USMCA manages almost $1.6 trillion in annual trilateral trade, and a protectionist revision of the agreement could reshape the continent’s industrial balance. For Mexico and Canada, the stakes would be twofold. Accepting stricter conditions would allow them to preserve at least part of their preferential access to the US market, but it would also force them to give up part of their manufacturing centrality in one of North America’s key industries.
