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

Dealer Debrief: Defection Data & EV Updates
In this week's debrief, host Lauren Lawrence discusses how to use defection data to your advantage and the latest on EV sales and charging infrastructure.
Read More →
How Defection Data is Bridging the Dealership Conversion Gap
Lead volume is flat, cross-shopping is up and brand loyalty is in retreat. As confident sales teams keep losing buyers they thought they had, daily industry sales data is showing dealers exactly where their funnel is breaking and how to fix it without buying a single new lead.
Read More →
Dealer Debrief: Where are you losing customers?
In this week's debrief, host Lauren Lawrence discusses the hidden leaks in dealerships where you might be losing customers without even realizing it.
Read More →
Dealer Debrief: Improving Your Inventory Management
In this week's debrief, host Lauren Lawrence covers a new survey that shows what service technicians really want and two launches that could help improve your inventory and vehicle life cycle management.
Read More →
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 →
What Market Timing Mistakes Mean for Your Reinsurance Program
When volatility hits, dealer-owned reinsurance programs face a familiar temptation: pull back and wait for calmer waters. New data from BOK Financial shows why that instinct can quietly cost you years of surplus growth.
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 →
