June 1, 2026
WASHINGTON – The U.S. government is demanding a regional content requirement for automobiles and auto parts qualifying for duty-free treatment under the United States-Mexico-Canada Agreement (USMCA) be raised from 75% to over 80%, it has been learned.
The latest demands also include the establishment of a new ratio for the use of U.S.-made parts. This, if accepted, could potentially affect major Japanese automakers that produce vehicles for the North American market in Mexico and other countries.
The USMCA is a free-trade agreement that came into effect in 2020 during U.S. President Donald Trump’s first term as a revision of the previous North American Free Trade Agreement (NAFTA), reflecting his views on U.S. trade deficits as a problem.
As this agreement is required to be reviewed every six years, full-scale negotiations between the United States and Mexico began on Thursday ahead of a July deadline for review.
According to informed sources, the United States has presented Mexico with stricter rules for qualifying for duty-free handling of automobiles and parts, demanding the ratio of parts sourced from the three countries be raised from the current 75% to over 80%. The demand is aimed at bringing back production facilities, such as factories, to the United States and creating jobs.
Furthermore, the United States is expected to demand the establishment of a new ratio for the use of U.S.-made parts, with many believing the ratio is likely to be 50% of those sourced from the region. The focus will be on whether this will be added to the rules for duty-free handling.
Major Japanese automakers and parts manufacturers have established vehicle and parts factories in Mexico and Canada, which are close to the massive U.S. market and offer lower labor costs. Toyota Motor Corp., Honda Motor Co., Nissan Motor Co. and Mazda Motor Corp. all have affiliated factories in Mexico.
For Toyota vehicles produced in Mexico, an estimated 30% of the parts are made in the United States. If the 50% procurement rule is imposed, Toyota could face higher tariffs and be forced to reevaluate its supply chain.
Under the USMCA, the agreement can be extended to 2042 under new rules and the duty-free framework will be maintained if all three countries agree. The United States and Mexico are scheduled to hold their second review meeting in June. Meanwhile, the Canadian government has not changed its critical stance toward the Trump administration and the schedule for talks has yet to be decided.
The Trump administration has previously threatened to withdraw from the USMCA and has sought amendments favorable to the United States.
However, major U.S. automakers also benefit from the agreement and the countries concerned are locked in a complex web of conflicting interests.
If the countries fail to reach an agreement, negotiations will continue beyond 2027 while the current framework remains in place.