U.S. Presses to Remove Chinese Auto Parts, Increasing Pressure for USMCA Renegotiation

【Financial News New York = Reporter Lee Byung-chul】The executive branch of the United States federal government under Donald Trump is pushing new rules in trade talks with Mexico that would sharply restrict the use of Chinese-made parts in vehicles produced in North America. The plan aims to reduce reliance on key Chinese components, including auto electronic parts, and raise the share of North American sourcing, accelerating the supply chain's "de-Chinaization." Industry sources say that if the rules are implemented, a major overhaul of the North American auto supply chain would be unavoidable.
The Financial Times (FT) reported on the 5th, local time, that the Trump administration had proposed significantly tightening auto rules of origin during the renegotiation of the United States–Mexico–Canada Agreement (USMCA).
According to sources familiar with the talks, the United States is demanding that more auto parts, including electronic components, be sourced from North America for finished vehicles to qualify for the tariff-free benefits under USMCA. Many automotive electronic and electrical parts are currently believed to depend heavily on China.
The United States is also seeking to raise the regional sourcing ratio for vehicles from the current 75% to more than 80%. Reports also said the proposal includes a requirement that up to 50% of a vehicle's value be produced in the United States.
If the new rules are introduced, automakers would effectively find it difficult to use Chinese parts while still receiving USMCA tariff-free benefits.
The talks are taking place ahead of the July 1 deadline for the USMCA review. The United States, Mexico, and Canada are discussing whether to extend the agreement, which took effect in 2020, for another 16 years. If no deal is reached, the pact will move into an annual review process.
Since taking office, Trump has pressured Mexico and Canada over the flow of fentanyl and illegal immigration. He has also intensified trade pressure, including imposing 50% tariffs on steel and aluminum products from the two countries on national security grounds.
Analysts say the United States is approaching the auto sector not simply as a trade issue, but as part of a broader supply chain strategy to counter China. Washington has long suspected that Mexico serves as a transit route for Chinese companies seeking to reroute exports.
In fact, Mexico emerged as the biggest beneficiary after the United States imposed tariffs on China. In 2023, it overtook China to become the United States' largest trading partner.
Still, a final agreement is expected to take considerable time.
The United States and Mexico held talks in Mexico City last month and are expected to continue additional consultations throughout the summer. Formal negotiations with Canada, however, have not yet begun.
Industry observers say prolonged uncertainty over the direction of USMCA revisions could also dampen investment in Mexico and Canada. Experts said the core of the talks is not simply revising a trade agreement, but a strategic U.S. effort to reduce China's influence in the North American auto supply chain.
\r\n
\r\n\r\n
  
\r\n
pride@fnnews.com Reporter Lee Byung-chul Reporter