The US is demanding stricter automotive content rules and threatening to reshape North American trade on its terms. Mexico sits at the negotiating table while Canada watches from the sidelines, facing tariffs if it refuses a deal neither may have written. The question now is whether either country can genuinely negotiate, or whether they're simply accepting the inevitable.
The US and Mexico have launched formal bilateral negotiations to restructure the six-year-old US-Mexico-Canada Agreement (USMCA), with Washington pushing for stricter regional content rules—most notably, a new US-specific minimum threshold for automotive components built south of the border.
The first round concluded on 28 May 2025, with subsequent talks scheduled for 16-17 June in Washington and the week of 20 July in Mexico City.
The US concluded discussions with the goals of reducing the trade deficit with Mexico and strengthening American supply chains. During this first round, negotiators discussed priority issues related to automotive rules of origin, steel and aluminium, and economic security.
The US and Mexico recognise the importance of advancing cooperation to enhance regulatory compatibility to strengthen sectors, including medical devices, pharmaceuticals, cosmetic products, and others.
We will continue advancing these discussions on June 16-17 in Washington, D.C., in addition to agriculture and a level playing field. The third round will be held during the week of July 20 in Mexico City.
The US continues to emphasise the importance of ensuring the Agreement benefits U.S. manufacturers, farmers, ranchers, workers, service suppliers, and businesses of all sizes, and of addressing free-riding from third countries.
Tightening the automotive standards
Currently, USMCA requires 75% of a vehicle’s value to come from North America, plus a separate provision mandating that 40% of passenger car content and 45% of pickup truck content originate from higher-wage facilities—effectively limiting the threshold to the US and Canada.
The Trump administration wants to layer on a new US-specific content floor, the exact percentage still undisclosed. It also plans to expand the definition of “core parts” to include major electronics modules, most of which are now produced in Asia. The goal is to shift electronics manufacturing toward Mexico while strengthening American supply chains and narrowing the US trade deficit.
Whether this new US-only requirement will replace or stack atop the existing regional value standard remains unclear—though industry observers expect Washington to use its typical negotiating tactic: strike a bilateral deal with Mexico, then present it to Canada as a non-negotiable condition.
Steel, tariffs, and duty-free trade ending
The backdrop for these talks has shifted dramatically. The administration has imposed blanket 25% tariffs on autos and auto parts, plus 50% duties on steel, aluminium, and copper, effectively ending three decades of duty-free North American commerce. While the US Trade Representative said some preferential rates may apply to Mexico and Canada, the tariff regime signals Washington’s willingness to use leverage to extract concessions.
Adding pressure, steelmakers have been told negotiators will demand that Mexican and Canadian steel receiving preferential treatment must be melted and poured in North America—a requirement absent in current USMCA terms. The US also wants Mexico to match American tariffs on third-country steel imports and derivative products, closing loopholes that have allowed Chinese steel components to flood Mexican factories.
Canada left at the table
By excluding Canada from the current round, the US is signalling its comfort with bilateral deals and its impatience with three-way consensus. This approach rankled Unifor, the Canadian auto workers’ union, whose president called the overture “one-sided” and accused the Trump administration of violating existing USMCA commitments. However, trade analysts expect Canada will ultimately accept whatever terms Washington and Mexico agree to, given that preferential access to the American market remains the best alternative.
The broader context
USMCA underpins nearly $1.6 trillion in annual trilateral trade, but its future now depends on closing gaps over the coming months. The administration’s focus is clear: shoring up US manufacturing, reducing the trade deficit with Mexico, and protecting supply chains from non-market economies—particularly China. Negotiators have also flagged regulatory alignment in medical devices, pharmaceuticals, and cosmetics as secondary priorities.
For Mexico, the balancing act is delicate. Accept tighter rules and risk higher costs for manufacturers, or resist and lose duty-free access to the world’s largest consumer market. For Canada, watching from the sidelines for now, the message is equally stark: accommodate US demands or face tariffs. Whether either country can genuinely negotiate rather than simply capitulate remains the unresolved question.
