Canada and Mexico are pushing the U.S. to broaden the share of vehicle content eligible for duty-free treatment and lower tariffs on autos.
The details: The proposals, which have reportedly been discussed in ongoing bilateral trade talks between each country and the U.S., take similar approaches, with both facing a major hurdle stemming from previous demands by the Trump administration.
Mexico's proposal would apply U.S. tariffs only to non-North American vehicle content, potentially lowering the effective tariff rate to 5% or 10%, according to Quartz.
A proposal involving Canadian officials would see Ottawa accept reduced U.S. auto tariffs of 10% to 15% and eliminate all retaliatory levies on American-made vehicles, reported The Globe and Mail.
Under the Canadian proposal, the U.S. would also maintain a tariff exemption on the value of American content in vehicles exported from Canada.
The U.S. has previously called for vehicles to contain 50% American-made parts as a condition for reduced tariff rates, a threshold many in the auto industry say would be practically impossible to achieve.
Why it matters: Lower tariffs and broader exemptions for North American vehicle content could reduce cost pressures on automakers and dealers, potentially limiting the impact of trade policy on vehicle pricing and inventory across the highly integrated North American auto market.
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Between the lines: The proposals are being discussed as uncertainty grows over the future of the United States-Mexico-Canada Agreement (USMCA), with ongoing trade tensions between the U.S. and Canada remaining a major sticking point.
In July, President Trump threatened to impose a 50% tariff on a range of Canadian goods, including electronics, alcohol and dairy, under the Smoot-Hawley Tariff Act of 1930 to ramp up pressure in trade talks.
The Trump administration has also taken issue with moves by Canadian Prime Minister Mark Carney to expand the country's auto trade relationships, most notably through a major tariff reduction on Chinese EV imports.
What they’re saying: “If you give concessions, the government in the U.S. will come back looking for more and more and more and more,” said Lana Payne, national president of Unifor, which represents 40,000 auto workers. Payne also warned that any tariff concessions made now could ultimately become part of the USMCA, per The Globe and Mail.
Bottom line: The proposals could provide automakers and dealers some relief from U.S. auto tariffs, but their fate hinges on broader trade negotiations that could reshape vehicle sourcing, production costs and pricing across North America.
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