Trade Dispute Decision Could Move More Auto Manufacturing to Canada, Mexico
Preliminary ruling would give countries more leeway in meeting duty-free threshold.

Vehicles are the top manufactured product traded among the three trade partners.
IMAGE: Getty Images/Morsa Images
Canada and Mexico prevailed in a trade fight with the U.S. over vehicles moved across regional borders in a decision that could lead to more auto parts manufacturing in those countries, Bloomberg reported.
The ruling by a panel convened under the 2020 U.S.-Mexico-Canada Agreement issued a preliminary ruling last month that hasn’t yet been made public, the news service said. The three countries have 30 days to respond to it before its final version is issued.
Mexico initiated the challenge in January, Bloomberg reported, to resolve a dispute among the countries over how to calculate the percentage of a vehicle that originates collectively in the three countries. It and Canada say the USMCA allows for more regionally made parts to be covered by tax-free shipping than the U.S. desires, Bloomberg said.
Under the USMCA, which replaced the Clinton-era North American Free Trade Agreement, or NAFTA, at the behest of former President Donald Trump, 75% of a vehicle’s components are to originate in the region to qualify for tax exemption.
The preliminary panel ruling could incentivize manufacturers to make car parts and assemble more cars in Canada and Mexico, particularly the latter, where wages are far lower than those in the U.S., and especially for high-cost components, such as electric batteries, one expert told Bloomberg. He said that the decision could both lower vehicle costs and increase carmaker profits.
The ruling apparently grants leeway in the percentage calculation. The new trade agreement had increased prices of North American-made vehicles due to the difficulty of achieving set domestic content amounts. The U.S. pushed a stricter calculation method than Canada and Mexico to determine parts’ origin, making it harder for plants in those two countries to meet the 75% threshold. NAFTA required a lower, 62.5%, threshold for duty-free shipping.
Vehicles are the top manufactured product traded among the three partners, Bloomberg said.
READ MORE: Decision on North American auto rules dispute 'imminent', Canada says
More Dealer Ops

Ladies and Gentlemen, This Is a Dealership: Why the Fundamentals Still Decide Who Wins
A teaching moment by a legendary football coach happens to apply perfectly in the auto retail space. Learn what it is and how to use it to your store’s advantage.
Read More →
Timing the Market Can Hurt Long-Term Program Performance
For dealer-owned reinsurance entities, avoiding volatility entirely can mean falling behind inflation and missing market rebounds that drive long term surplus growth. Missing just a handful of strong market days can materially impact cumulative returns—an important reminder for long horizon trust and investment strategies.
Read More →
Dealer Ads and the FTC
The agency has made it clear in recent enforcement actions and warnings, in auto retail and other industries, that advertised prices must include all nonoptional costs to the consumer.
Read More →
Used Autos Supply Dwindles
The March shopping surge, despite high prices, cut into inventory by the most since the thick of the pandemic, Cox Automotive analysts calculated.
Read More →
Managing Risk Effectively Through Changing Times
The variables influencing risk pricing have changed significantly over the past five years. Being proactive and responsive to emerging trends is not optional but essential.
Read More →
Survey Reveals What Won't Fix What's Breaking Car Sales
AutoPayPlus says extra-long auto loans are trapping consumers and threatening the dealer trade-in cycle, and that the industry is leveraging the wrong tools to combat high MSRPs.
Read More →
IA American Appoints Two Execs
Senior vice presidents of the company's agent and dealer channels chosen to support general agents and help auto dealers with sales and performance.
Read More →
Cox Automotive Acquires Inspection Firm
Full ownership of Alliance Inspection Management, or AiM, meant to unlock growth for Manheim inspection capabilities
Read More →
Assurant Expands Partnership With Holman
Extended collaboration delivers training, products and performance development to 30 newly acquired Holman dealerships
Read More →
Franchises, Throughput Down in First Half
A handful of states see franchise growth through June, while EV sales per store boost overall business in U.S.
Read More →