The United States and Mexico kicked off initial negotiations this week in Mexico City on restructuring the United States-Mexico-Canada Agreement (USMCA). According to the Wall Street Journal, Trump administration negotiators plan to propose that, to qualify for preferential tariff rates under the agreement, at least 50% of automotive parts and raw materials, by value, must be sourced from within the United States. Reuters, citing four sources with knowledge of the matter, confirmed the U.S. is also demanding the overall North American content requirement be raised from the current 75% to 82%. The existing agreement has no specific U.S.-only content threshold; this proposal would represent the most significant change to USMCA’s rules of origin since the pact took effect in 2020. Notably, Canada has been excluded from this round of talks, and the new proposal would not count Canadian parts toward the North American content calculation.
If the plan is adopted, industry analysts estimate a full transition period of three to four years. According to the yet-to-be-released 2026 “American Made Auto Index,” only 109 vehicle models are currently estimated to have more than 51% U.S. content, with the top ten largely consisting of Tesla vehicles. Taking the GMC Terrain SUV, assembled in Mexico, as an example, U.S. and Canadian parts account for just 11% of the vehicle’s total value. The United Auto Workers (UAW) has expressed support for the proposal, while industry groups such as the Automobile Manufacturers Association are calling for the maintenance of a unified trilateral North American framework, warning that the new rules would drive up consumer car prices. U.S. Trade Representative Jamieson Greer is reportedly planning to first negotiate the new rules of origin with Mexico, and then present the final terms to Canada on a take-it-or-leave-it basis.