By David Shepardson, Emily Green, Nora Eckert and David Lawder
WASHINGTON/MEXICO CITY, May 29 (Reuters) – The Trump administration wants to increase the level of regional content in North American-built vehicles to 82% to qualify for preferential treatment under the U.S.-Mexico-Canada Agreement on trade, with 50% of that value produced in the United States, four people familiar with the U.S. negotiating position said.
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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% 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% for pickup trucks. Overall, vehicles built in North America currently must have 75% regional content to qualify for preferential treatment under USMCA.
The U.S. demand and lack of accommodation for Canada are 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 USMCA would continue as a trilateral trade pact or be broken into separate bilateral agreements.
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Reuters first reported on Thursday that U.S. negotiators were pursuing a U.S.-specific automotive content requirement. Trade officials briefed industry lobbyists on the proposal for 82% regional content, but it was not immediately clear how that figure, or the 50% U.S. value requirement, would be calculated.
Trade officials also have proposed raising regional value content for heavy trucks to 75% from 70% in the current USMCA, a source familiar with the U.S. proposals said.
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% tariffs on Canadian and Mexican vehicles and components, with 50% 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.
(Reporting by David Lawder and Emily Green in Mexico City, David Shepardson and Nora Eckert in Washington and Kalea Hall in Detroit; Writing by David Lawder; Editing by Mike Colias and Aurora Ellis)
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