Mexico increases auto parts purchases outside North America

Mexico imported fewer auto parts from the United States and Canada than from the rest of the world in 2024 compared to 2019, despite the stricter rules of origin in the North American trade agreement between those three nations (USMCA).
Of all Mexican auto parts imports in 2024, worth $58.25 billion, those originating in the United States and Canada accounted for 58.8%, a smaller share than the 64.8% in 2019.
This means that purchases of automotive parts in Mexico from countries outside the USMCA region increased from 35.2% to 41.2% over the same period.
The rules of origin establish three main requirements for finished vehicles: regional value content (RVC), labor value content (LVC), and steel and aluminum purchasing requirements.
Between 2019 and 2024, U.S. auto parts exports increased by $6.4 billion (7.3%), reaching $93.5 billion.
This increase was primarily due to the growth in auto parts exports to Mexico, which amounted to $5.5 billion (16.5 percent).
According to the U.S. International Trade Commission (USITC), high inflation during this period kept U.S. auto parts exports below 2019 levels in inflation-adjusted dollars over the same period.
The TRC rules require vehicle manufacturers to use a certain percentage of content originating in a USMCA country for those goods to qualify for duty-free treatment.
In turn, the CVL rules, first introduced in the USMCA, require that 40% of a vehicle's content (or 45% for heavy-duty trucks) be produced using well-compensated labor (defined as labor paid an average base hourly rate of at least $16 per hour) for the vehicle to qualify for duty-free treatment.
Finally, steel and aluminum purchasing requirements, also introduced for the first time in the USMCA, require vehicle manufacturers to source at least 70% of their steel purchases and 70% of their aluminum purchases from USMCA countries to qualify for duty-free treatment.
In addition to the rules for vehicles, the rules of origin provide product-specific rules of origin for various vehicle parts. Product-specific rules determine whether a vehicle part qualifies for duty-free treatment. The rules of origin also classify vehicle parts into one of three categories (essential parts, principal parts, and complementary parts).
As implementation of the USMCA continues, the U.S. Congress could examine the impact of the USMCA's automotive rules of origin on U.S. producers, particularly small and medium-sized businesses, and the North American auto industry.
Additionally, a U.S. Congressional analysis indicates that the electric vehicle (EV) tax credit, known as the Inflation Reduction Act (IRA), contains certain North American assembly requirements that could further disrupt the North American automotive supply chain if manufacturers choose to qualify for the EV tax credit.
U.S. trading partners have argued that the IRA requirements violate World Trade Organization (WTO) rules. Some members of Congress have stated that these requirements are important to reduce dependence on China and support American jobs.
Meanwhile, labor groups in the United States have expressed concern about ensuring that the transition to EVs does not negatively affect American workers.
The same analysis adds that the U.S. Congress could examine the impact of the EV IRA tax credit requirements on the North American automotive industry and the use of the USMCA.
Additional supervision
Other issues Congress could consider addressing through legislation or additional oversight include any implementation and/or enforcement issues with the rules of origin, as well as the implications of the January 2023 USMCA rules of origin panel decision and the lack of a resolution.
It could also consider raising the 2.5% Most Favored Nation (MFN) tariff on passenger vehicles to encourage compliance with the rules of origin and the implications of such an increase.
Finally, there is the possibility of addressing the dispute over automotive rules of origin and other issues related to the North American automotive sector, such as potential investments from China-based companies, as part of the joint review of the USMCA in 2026.
For now, a March 2025 proclamation by President Donald Trump established 25% tariffs on certain auto parts starting May 3, with exemptions for USMCA-compliant auto parts until the Administration “establishes a process to apply the tariff exclusively to the value of the non-U.S. content” of those parts.
Eleconomista