US seeks at least 50% of autos made domestically under USMCA renegotiation with Mexico

The United States has opened negotiations with Mexico aimed at requiring that at least 50% of vehicles traded under the USMCA be made in the US. The talks, which began on May 28, represent a fundamental shift from the existing agreement’s approach of treating North America as a single manufacturing bloc.

What the current rules actually say

The USMCA, which replaced NAFTA and took effect in 2020, already tightened automotive content rules significantly. Under NAFTA, vehicles needed 62.5% regional value content to qualify for tariff-free treatment. The USMCA bumped that to 75% for light vehicles, with the full requirement phasing in by July 2023.

On top of that, the agreement introduced labor value content rules. These require that 40% of a passenger vehicle’s content and 45% of a light truck’s content come from workers earning at least $16 per hour. There’s also a mandate that 70% of the steel and aluminum used in vehicles be sourced from North America.

The new proposal goes further by demanding that a substantial chunk of that content specifically originate in the United States, not just anywhere on the continent.

Why now, and why without Canada

The negotiations are scheduled to run through late July 2026 and are taking place in Mexico City. Perhaps the most notable detail: Canada has been excluded from the table.

The timing also coincides with a 25% tariff on auto imports that took effect in April 2025. That tariff already allows deductions for US content in USMCA-compliant imports, creating a financial incentive for automakers to source more parts from American factories. The proposed content rules would formalize and extend that incentive into the trade agreement itself.

US Trade Representative Jamieson Greer has framed the push as an effort to further incentivize domestic manufacturing. The logic is straightforward: if companies want tariff-free access to the US market, they need to build more of the car in the US.

What this means for automakers and investors

The 25% auto tariff that’s already in place adds another layer of pressure. Automakers are currently navigating an environment where non-compliant imports face steep costs, and the proposed USMCA changes would raise the compliance bar even higher.

The negotiations running through late July 2026 give markets a defined window to price in expectations. Any signals from the talks about the specific percentage thresholds, phase-in timelines, or enforcement mechanisms will likely move auto sector stocks. The difference between a 50% US content requirement with a five-year phase-in and the same requirement effective immediately is enormous in terms of financial impact.

One wildcard: Canada’s exclusion from these talks doesn’t mean Ottawa is comfortable sitting on the sidelines. Any bilateral deal between the US and Mexico that disadvantages Canadian auto manufacturing could trigger a separate round of contentious negotiations, potentially fragmenting the trilateral framework that was supposed to provide stability for North American trade.

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