The North American automotive sector must prepare for increased scrutiny related to compliance with the origin of its parts in order to continue benefiting from the United States-Mexico-Canada Agreement (USMCA), according to experts.
“Verifications will come very frequently, much more than normal,” said Fausto López, regional vice president of the Mexican Business Council for Foreign Trade, Investment and Technology (Comce) South , during the conference titled T-MEC and Tariff Impact (Automotive Industry) North America , organized by the Mexican Institute of Foreign Trade Executives (IMECE) .
Fausto López’s statement comes as the U.S. administration of Donald Trump has been pushing for a 25% tariff on imported automobiles starting April 3 , a measure intended to stimulate the growth of the industry in the country.
The negotiator of the so-called “next room” (business team) during the meetings that resulted in the signing of the USMCA also explained that, since the entry into force of the North American Free Trade Agreement (NAFTA) in 1994 and the elimination of tariffs, Mexico’s automotive exports have experienced a 200% growth , reaffirming the sector’s integration into the North American region.
In the mid-1990s, a “vochito” (Volkswagen sedan) produced in the country barely had 30% of regional origin; today, the USMCA requires a Regional Value Content (RVC) of 75% , a RVC for essential parts also of 75%, that aluminum and steel purchases be 70%, and a Labor Value Content of 40 percent.
Currently, of the total new car sales generated in the United States in 2024, 16.3% originate in Mexico , making it the main external supplier to the United States, followed by South Korea (8.8%), Japan (8.4%), Canada (6.2%), and Germany (2.7%). According to Standard & Poor’s, 53.9% of sales come from units produced in the United States itself.
“With NAFTA, we lived in a comfort zone, and there were no revisions until Mr. Trump came along in 2016 and started saying that NAFTA was the worst agreement they’d ever signed,” López said.
Mexican President Claudia Sheinbaum has said that the country will not issue a comprehensive response to the United States’ imposition of tariffs on automotive imports until April 3 .
Trump’s latest tariff announcement allows USMCA-compliant vehicle manufacturers to certify U.S. content, and the tariffs apply only to non-U.S. vehicles. Tariffs on USMCA-compliant parts will not apply until a process is established to identify U.S.-origin content in those parts.
Fitch expects U.S. automakers to raise prices across the board, although the tariffs will affect each make and model differently. Some automakers may struggle to raise prices enough to cover the 25% tariffs and will have to make painful adjustments to production and sales plans.
“The impact of tariffs on auto parts is less transparent due to the complexity of the supply chain. Beyond higher costs, there is some risk that the transition could result in parts delays or supply chain disruptions affecting U.S. auto manufacturing, similar to 2021-2022. However, this is temporarily mitigated by the delay in tariffs on USMCA-compliant auto parts,” according to Fitch.
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