Trump administration wants to raise North American auto content to 82%, with half from US

A Toyota Tundra is inspected during the final stages of assembly at the Toyota Manufacturing Texas, Inc. plant in San Antonio, Nov. 15, 2006. AP-Yonhap

WASHINGTON/MEXICO CITY — The Trump administration wants to increase the level of regional content in North American-built vehicles to 82 percent to qualify for preferential treatment under the U.S.-Mexico-Canada Agreement on trade, with 50 percent of that value produced in the United States, four people familiar with the U.S. negotiating position said.

The expansive demand, unveiled during this week's U.S.-Mexico negotiations over revisions to the six-year-old USMCA in Mexico City, has no provision for counting any parts content from Canada in the totals. Canada is not represented in the Mexico City talks, the sources said.

The shift, if accepted, would be a major break from the current USMCA, which requires that 40 percent of the "core parts" value of North American passenger vehicles be produced in high-wage jurisdictions, effectively the U.S. or Canada.

That threshold is now 45 percent for pickup trucks. Overall, vehicles built in North America currently must have 75 percent regional content to qualify for preferential treatment under the USMCA.

The U.S. demand and lack of accommodation for Canada is consistent with Trump administration officials' frequent questioning of why Canada should export vehicles and auto parts to the U.S. and voicing a desire to move that production to the U.S.

Auto industry officials said that there was a high likelihood that U.S. Trade Representative Jamieson Greer would seek to negotiate the new rules of origin with Mexico and then present them to Canada as a take-it-or-leave-it proposition. Greer has been evasive about whether the USMCA would continue as a trilateral trade pact or be broken into separate bilateral agreements.

Reuters first reported Thursday that U.S. negotiators were pursuing a U.S.-specific automotive content requirement. But it was not immediately clear how the 82 percent overall and 50 percent U.S. value requirements would be calculated.

The USMCA was launched in 2020 to replace the 1994 North American Free Trade Agreement, maintaining a duty-free trade zone that underpins nearly $1.6 trillion in annual trilateral trade. But President Donald Trump last year imposed 25 percent tariffs on Canadian and Mexican vehicles and components, with 50 percent duties on steel, aluminum and copper from those countries.

Greer has said that he intends to keep some level of tariffs on key Mexican and Canadian goods in the revised trade pact. But the two partners may get some preferential tariff rates. Currently, vehicles from Japan, South Korea, the European Union and Britain can be imported at lower rates than from Canada or Mexico.