U.S., Mexico open trade talks to tighten auto content rules

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US-Mexico open auto trade talks

Highlights

U.S. and Mexico opened trade talks aiming to introduce new U.S.-specific minimum content rules for autos, shifting from current USMCA standards.
U.S. negotiators seek stricter regional sourcing rules for steel, requiring North America-melted and poured metal, and want Mexico to match U.S. steel import tariffs.
Ongoing global tariffs of 25% on autos and auto parts, and 50% on steel, aluminum, and copper, complicate $1.6 trillion North American trade as USMCA review continues.

Negotiations focus on automotive and steel sourcing

As reported by Reuters, the proposed changes include a new U.S.-specific minimum content requirement for cars and trucks produced in Mexico, according to two people familiar with Washington's negotiating position. The exact percentage sought by the U.S. is not immediately available, but the move marks a significant shift from the current USMCA structure.

The existing agreement requires 40% to 45% of the value of North American-built vehicles to come from higher-wage factories, effectively in the U.S. or Canada, based on core parts such as engines, transmissions, body panels and chassis components. U.S. Trade Representative Jamieson Greer says he wants stronger North American rules of origin that boost manufacturing in the United States, and says negotiators are discussing ways to increase U.S. content in these goods.

The U.S. Trade Representative's office says the U.S. and Mexico are holding three bilateral negotiating rounds through late July, including the current round ending Friday in Mexico City, while Canada is excluded from the current phase. Barry Zekelman, chief executive of Zekelman Industries, says steelmakers are told that USTR negotiators will also push for Mexican and Canadian steel receiving preferential U.S. tariff treatment to be melted and poured in North America, a rule not included in the current pact.

Zekelman also says USTR wants Mexico to match U.S. tariffs on steel imports and steel derivative products arriving from outside North America. He says the objective is to close loopholes that still allow Chinese steel components to enter Mexican manufacturing operations.

Tariffs complicate North American supply chains

The review unfolds as the Trump administration keeps global tariffs of 25% on autos and auto parts and 50% on steel, aluminum and copper, disrupting the duty-free model that underpinned North American trade for roughly three decades. Greer says Washington will maintain at least some tariffs on Mexican and Canadian industrial goods, though potentially at preferential rates.

The six-year-old USMCA and its predecessor agreement support a highly integrated regional economy with nearly $1.6 trillion in annual trilateral trade, making the coming months of negotiations critical for manufacturers across the continent. Dan Ujczo, a lawyer at Cenovus Energy who specializes in North American trade, says he remains optimistic that the U.S. and Mexico, and later Canada, can bridge differences and extend the pact with tighter regional content rules and stronger protections against non-market economies such as China.

Ujczo says the longer-term goal is to preserve the most favorable access for Canada and Mexico to the U.S. market compared with any other countries. That leaves the talks as a key test of whether the region can preserve integrated production while adding new safeguards for domestic industry.

Our earlier article on the European Union’s plan to broaden import quotas and tariffs on Chinese goods described Brussels’ push to counter what it sees as unfair, low-cost imports hurting European manufacturers. We noted that the debate centers on protecting jobs and industrial competitiveness, with policymakers weighing how far to go in using trade defenses while still maintaining open trade rules.

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