The United States is seeking major changes to automotive rules of origin under the USMCA, proposing that 50% of the value of every vehicle produced within the trade bloc originate specifically from the United States, according to people familiar with the negotiations cited by Reuters. The proposal, presented during bilateral talks between the United States and Mexico in Mexico City, would also increase the regional content requirement for vehicles from the current 75% to 82%.

The measure would represent one of the most significant revisions to the automotive framework established under the USMCA in 2020. Current rules require that 75% of a vehicle’s content originate in North America to qualify for preferential tariff treatment, while also mandating that 40% of passenger vehicle core parts and 45% of pickup truck parts be produced in high-wage jurisdictions, including the United States or Canada. The new proposal would remove Canada-specific recognition from the calculation and establish a direct US-origin threshold.

The negotiations are taking place as Mexico pushes for the elimination of tariffs on automobiles, steel and aluminum exports to the United States ahead of the formal USMCA review process. Mexican President Claudia Sheinbaum said the government’s priority is to restore zero-tariff conditions for strategic manufacturing sectors that support regional supply chains.

“The priority of Mexico in the dialogue with the United States is that there be zero tariffs in the automotive industry, steel and aluminum,” Sheinbaum said during a March 20 press conference.

The discussions in Mexico City marked the first of three planned bilateral negotiation rounds between the two countries. The Office of the US Trade Representative said Deputy US Trade Representative Ambassador Jeff Goettman led the US delegation on May 28–29. Additional rounds are scheduled for June 16–17 in Washington, D.C., and during the week of July 20 in Mexico City.

The talks focus on rules of origin for industrial goods, particularly in the automotive sector, which remains one of the largest drivers of North American trade and manufacturing integration. The three USMCA economies conduct approximately US$1.6 trillion in annual trade.

Industry sources cited by Reuters said the United States may seek to finalize an agreement with Mexico before presenting terms to Canada. Canadian officials were not included in the recent Mexico City talks. US Trade Representative Jamieson Greer has not confirmed whether the future framework will remain trilateral or evolve into separate bilateral agreements.

The proposal emerges amid broader tariff measures implemented by President Donald Trump on imports from Mexico and Canada. The administration imposed 25% tariffs on vehicles and auto parts from both countries, along with 50% duties on steel, aluminum and copper imports.

Greer has indicated that some level of tariffs on strategic goods could remain in place even after a revised agreement is completed. However, Mexico and Canada may receive preferential treatment compared to other exporting countries.

“Tariffs on vehicles and key inputs such as steel and aluminum continue to affect cost structures and investment decisions,” Sheinbaum said. “The objective is to restore the conditions that existed before the tariffs.”

The financial impact of tariffs on the global automotive sector has accelerated over the past year. According to Automotive News, automakers incurred approximately US$35.4 billion in tariff-related costs during 2025.

In response to industry pressure, the US government reduced the effective tariff on passenger vehicles imported from Mexico from 25% to approximately 15%, provided manufacturers comply with USMCA rules of origin requirements. The change was published in Proclamation 10908 by the US Department of Commerce and applied retroactively beginning April 3, 2025.

“Once the new regulation takes effect, vehicles manufactured in Mexico and exported to the United States will face around a 15% tariff instead of the 25% previously applied,” said Marcelo Ebrard, Mexico’s Minister of Economy. “In some cases, the reduction could be even greater, depending on specific USMCA criteria.”

Ebrard explained that tariff reductions are linked to the percentage of US content incorporated into vehicles assembled in Mexico and Canada.

“If a vehicle includes 40% US content, the importer avoids paying the tariff on that portion, with the remaining value still subject to the tariff,” Ebrard said. “This significantly reduces the impact for Mexico, reinforcing its status as a key trading partner.”