The similar treatment between Mexico, the United States and Canada in the rules of origin for auto parts in the USMCA that was included in a proclamation by President Donald Trump was described as advantageous for Mexico by the Secretary of Economy, Marcelo Ebrard.
Trump signed an executive order Tuesday tightening the USMCA’s automotive rule of origin, raising the Regional Content Value to qualify for tariff exemption.
USMCA auto parts rules of origin
“There is already a reference to auto parts and components in the USMCA. It means that they will be treated similarly to U.S. parts or components,” said Ebrard during the presentation of Plan Mexico.
He then added: “That and other contents of the measures that are being announced, speak to us, and yesterday we discussed it with the Japanese ambassador and Japanese industry, that we will continue to have a relative, advantageous situation with respect to the set of tariffs that are underway”.
Trump’s executive order unilaterally creates an 85% regional content rate to achieve full exemption on auto parts within a one-year period, when currently all USMCA-compliant auto parts are exempt from tariffs.
Trump’s new proclamation also establishes a formula that somewhat reduces tariffs on U.S. imports of auto parts if those parts originate in any of the USMCA countries.
Offsets
A White House fact sheet gave as an example that if a manufacturer builds a car in the U.S. with 85% U.S. or USMCA content, it will not owe tariffs on the production of that vehicle for the first year.
“We were very pleased to see that, because we thought that the USMCA reference was no longer going to be used (…) It’s going to be useful if you have parts in Mexico, components in Mexico, to make it part of your content to have access to offsets and other things in the United States,” Ebrard said.
The order provides an offset to a portion of the tariffs for auto parts used in vehicles assembled in the United States equivalent to 3.75% of the manufacturer’s suggested retail price of a manufacturer’s U.S. production for the next year (April 3, 2025 to April 30, 2026), and 2.5% of the following year’s U.S. production (May 1, 2026 to April 30, 2027).