Published May 29, 2026
President Donald Trump’s administration aims to raise the percentage of locally produced ingredients in North American cars eligible for trade incentives under the United States-Mexico-Canada Agreement (USMCA) to 82%, with 50% of that value produced in the United States.
The new proposal, first reported by Reuters citing four anonymous sources familiar with the matter, emerged amid USMCA revision negotiations in Mexico City. Canada did not attend the negotiations.
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If accepted, the change would be a significant change from the current USMCA, which requires that 40% of the “core parts” value of North American passenger cars be produced in high-wage jurisdictions, effectively the United States or Canada.
That threshold is currently 45% for pickup trucks. Overall, vehicles manufactured in North America must now have a regional content of 75% to receive preferential treatment under the USMCA.
Auto industry officials told the outlet that U.S. Trade Representative Jamieson Greer will negotiate with Mexico and present Canada with a “take it or leave it” offer.
Canada’s exclusion from the USMCA negotiations, which are scheduled to be reviewed in July, comes amid heightened tensions between Washington, D.C. and Ottawa.
USMCA, launched in 2020 to replace the decades-old North American Free Trade Agreement, maintained a duty-free trade zone that supports nearly $1.6 trillion in annual trade between the three countries. But President Trump last year imposed 25% tariffs on cars and parts from Canada and Mexico, and 50% tariffs on steel, aluminum and copper from those countries.
Mr. Gurría said he intends to maintain certain levels of tariffs on major products from Mexico and Canada in the revised trade deal. However, both partners may receive some preferential tariff rates. Currently, vehicles from Japan, South Korea, the European Union, and the United Kingdom can be imported at lower rates than from Canada or Mexico.
economic changes
Canada’s economy shrank in the first quarter from a year earlier, marking the second consecutive quarter of decline amid uncertainty over tariffs.
Canada’s gross domestic product (GDP) unexpectedly fell by an annualized 0.1 per cent in the first quarter, compared with a downwardly revised 1 per cent decline in the fourth quarter of last year, Statistics Canada said Friday. However, on a quarterly basis, GDP in the first quarter was flat against the decline in the fourth quarter of last year.
“Our forecast for accelerated growth in the second half of the year through 2027 is dependent on a favorable USMCA renegotiation, an early end to the Middle East war, and the resumption of normal trade through the Strait of Hormuz,” Tony Stilo, director of Canadian economics at Oxford Economics, said in a note, adding that “the economy faces a potentially difficult road ahead.”
Canada’s economy has been hit particularly hard by President Trump’s tariffs, which threatened to annex the country and make it the 51st U.S. state. Prime Minister Mark Carney was elected on a platform to strengthen and diversify Canada’s economy away from the United States.
As part of that effort, Canada is in the process of strengthening economic ties with China, its second-largest trading partner and until recently a relationship that had been frozen for years.
China could exceed its goal of increasing exports to China by 50% by 2030, Chinese Foreign Minister Wang Yi said in a meeting with Canadian Foreign Minister Anita Anand on Friday.
Mr. Wang is on a three-day visit to Canada, making it the first state visit by a Chinese foreign minister in 10 years. He believed Canada’s exports to China could increase by 100%, riding on the momentum between the two countries.
Canada and China signed their first trade deal in January, lowering tariffs on electric vehicles.
“Canada is committed to growing our economy and diversifying our trade relationships,” Anand said during the meeting.
Despite tensions, Canada continues to promote a strong relationship with the United States.
Speaking at New York’s Economic Club on Thursday, Carney called for a new partnership with the United States as both countries decide to renew their agreement.
Mr Carney said there was a need for “true partnerships” to rethink cooperation in specific areas that are seriously challenged by global competition. “We live in a world where integration has been weaponized,” he warned, which is why Canada is diversifying away from the United States and signing trade deals with countries around the world.
“Our core objective in these partnerships is to increase strategic autonomy, because we live in a world where integration is weaponized, because a nation that cannot feed itself, fuel itself, and defend itself is not truly sovereign,” Carney said.
