While North America is caught up in World Cup excitement, a far less visible but equally consequential event is unfolding behind closed doors: the review of the United States–Mexico–Canada Agreement (USMCA). The process is surrounded by rumors, political tensions, and mixed signals. Among the many issues on the table, none appears more consequential than the future of the automotive industry.
Recent reports suggest that Washington is seeking significant changes to the rules of origin for vehicles manufactured in North America. The proposal drawing the most attention would require at least 50% of a vehicle’s content to be produced in the United States in order to qualify for preferential treatment under the agreement. If adopted, this would represent a fundamental departure from the framework that originally shaped NAFTA and was later carried forward under the USMCA.
The situation began to shift in April of last year, when the U.S. administration imposed a 25% tariff on imported vehicles that failed to meet certain origin requirements. Washington’s goal was to boost domestic manufacturing and reduce dependence on foreign suppliers. The challenge, however, is that in the automotive industry, borders exist on maps far more than they do in supply chains.
Over nearly three decades, North America has built one of the world’s most sophisticated manufacturing platforms. A vehicle assembled in Mexico may include Canadian steel, U.S.-made semiconductors, transmissions manufactured in Ohio, electronic components produced in Guanajuato, and engines built in Coahuila. The region’s competitiveness has been built precisely on this level of integration, with Mexico becoming an indispensable link in North America’s strength as a manufacturing powerhouse.
A requirement that 50% of a vehicle’s content be produced exclusively in the United States would have significant implications. For Mexico, it would increase pressure to shift higher-value-added activities north of the border. Mexican manufacturing could retain portions of assembly and labor-intensive production, but it would risk losing ground in more advanced technological segments. Automakers would also face a difficult transition. Reconfiguring supply chains that took decades to build would involve substantial costs, billions of dollars in new investments, and potentially higher prices for consumers.
Against this backdrop, a question that would have seemed unthinkable just a few years ago has resurfaced: What would happen if the United States decided to withdraw from the USMCA? And if that were to occur, would it make sense for Mexico to negotiate a bilateral agreement with Washington—a so-called “USM”?
At first glance, the idea may seem appealing. After all, roughly 80% of Mexico’s automotive exports are destined for the U.S. market. Yet a bilateral agreement would require Mexico to negotiate directly with a much larger trading partner that holds considerably greater leverage. Canada, which currently shares Mexico’s interests on issues such as rules of origin, dispute resolution, and regional integration, would no longer be a natural ally at the negotiating table.
More importantly, a bilateral agreement would ignore the industrial reality of North America. Automotive supply chains were not designed to function between two countries—they were designed to operate across three. Canadian aluminum, critical minerals, Mexican auto parts, and American technological capabilities are all part of a single integrated production ecosystem. Disrupting that model could create more inefficiencies than it would solve.
Perhaps the real question is not whether the USMCA should survive, but what kind of USMCA North America wants to build in order to compete in an increasingly challenging global automotive industry. As the United States seeks to reduce its dependence on China, the rest of the world is watching Chinese automakers continue to expand their global footprint and capture market share.
Meeting that challenge may require greater regional integration—not less. For Mexico, the most effective strategy does not appear to be preparing for a hypothetical bilateral agreement with the United States, but rather defending the trilateral framework that has made North America a manufacturing leader for decades. Rules of origin can be modernized, traceability can be strengthened, and mechanisms to limit non-regional content can become more rigorous. What should not be lost is the vision of North America as an integrated economic bloc.
If the modern automotive industry has demonstrated anything, it is that competing is far easier when companies and countries work together. The real risk is not that the agreement changes its name—it is forgetting why it worked so well in the first place.
Originally published in El Universal: https://www.eluniversal.com.mx/opinion/arturo-orozco-leyva/la-sombra-de-china-en-la-negociacion-del-t-mec/
