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Washington — Automaker Volkswagen AG said in a public filing this week that President Donald Trump’s 25% tariffs on Mexican and Canadian automotive goods violate binding trade agreements he approved during his first term.
The German company made the claim in a comment submitted Wednesday to Trump’s U.S. Trade Representative office, which was soliciting feedback on technical but highly consequential automotive rules within the United States-Mexico-Canada free trade agreement. The deal is due for a much-anticipated and legally required review in 2026.
“First, the Section 232 automotive tariffs harm the U.S. auto industry and violate the binding USMCA side letters on automotive trade under Section 232,” wrote Volkswagen vice president Anna Schneider, referring to a provision of the Trade Expansion Act of 1962. “These letters were negotiated by the first Trump Administration, ratified by Congress, and relied upon by the auto industry.”
Though some in the auto industry have privately suggested that Trump’s tariffs amount to violations, companies have been hesitant to issue public positions saying so. Instead, they have mostly stuck to questioning the merits of Trump’s actions while also offering constructive recommendations on how U.S. trade policy should proceed.
That trend largely continued in a series of letters filed this week by automakers, suppliers and trade groups regarding the USMCA’s automotive rules of origin provisions. The Trump administration previously solicited broader comments on the trade deal in November, but the latest request for comments was for autos only.
Volkswagen, amid falling U.S. sales, was more critical of the Trump administration than industry competitors in its public filing. Europe’s largest automaker pleaded for tariff relief and requested that existing USMCA rules not be made stricter after the review.
“The current tariff burden on the automotive industry — from raw materials through Tier 1 suppliers — is excessive. Investments made by automakers to gain the benefits of USMCA compliance have been undermined by the failure of the United States to honor the USMCA side letters on automotive trade and by the continued imposition of tariffs on USMCA-compliant vehicles,” Schneider said in the company letter.
She added: “Further, given the Administration’s focus on affordability, any further increases in the auto (rules of origin) would only serve to harm this goal for American car-buying consumers.”
Old and new rules
Automotive rules of origin — or “ROO” — provisions were a top priority during Trump’s first term as U.S. officials sought steeper local manufacturing rules for goods to become eligible for tariff-free trade within North America. The 2026 review could bring updates to those rules, which were some of the most vigorously negotiated from the original USMCA.
“The auto rules are a big deal,” said Blake Harden, a lawyer and trade policy expert at consultancy EY. “They set the framework for how automotive companies think about structuring their supply chains if they want to qualify vehicles for preferential duty treatment.”
Harden, who worked as a lawyer for the U.S. House Ways and Means Committee during the original USMCA negotiations, said there was a “high degree of focus and attention” on automotive ROO. She recalled that there were frequent discussions between industry representatives, lawmakers on Capitol Hill and members of the first Trump administration.
The USMCA, which Trump signed in 2020 but has since distanced himself from, was significantly stricter on ROO than the North American Free Trade Agreement that preceded it. Trump and others have long slammed NAFTA as a key contributor to manufacturing decline in the United States.
As a response, the USMCA included revamped — or in some cases new — eligibility requirements for vehicles and auto parts shipped within the tri-country region to qualify for tariff exemptions.
For example, regional value content for vehicles needed to meet or exceed 75%, up from 62.5% under NAFTA. The agreement also added new regional content rules for “core parts” like engines or transmissions, labor value content rules requiring that 40–45% of a vehicle must be made by workers earning more than $16 per hour, and new steel and aluminum content rules requiring that 70% must come from within North America.
Trump stopped fully honoring the trilateral agreement last year when he imposed 25% taxes on imported goods from Mexico and Canada, albeit with some exceptions. Trade and auto sector experts, such as the law firm Holland & Knight LLP, have noted that Trump has broad authority to pull back on USMCA obligations for national security reasons.
For autos, the administration later granted an exemption to the U.S. content of USMCA-compliant vehicles and does not currently enforce the 25% tariffs on qualifying auto parts. But there have still been significant tariff burdens.
Trade and auto sector experts, such as the law firm Holland & Knight LLP, have noted that Trump has broad authority to pull back on USMCA obligations for national security reasons.
Federal trade data suggest that the effective duty rates on automotive goods from Mexico and Canada now hover around 10%, a historic high that has cost the auto industry billions. Rates were about 0% before Trump returned to office, and U.S. automakers have consistently complained that new trade deals with the European Union, Japan and South Korea have put North American production at a disadvantage.
While the tariff-minded Republican president has quickly bent U.S. trade policy to his liking over the past year, Harden of EY said the industry feedback process for USMCA is still important.
“It’s public, so stakeholders of all stripes get to see that and react to it,” the lawyer said. She added that there will be “conversations going on at all levels,” so even technical suggestions from the auto industry can land with the appropriate officials within the Trump administration or Congress.
“They might give ideas that (the administration) hadn’t thought of, right? The companies have that kind of real-world understanding of their business,” Harden explained. “And when the rules are very, very nuanced, I think that type of information is likely useful to the administration.”
View from Detroit
The message from the Detroit Three automakers in their latest filings to the Trump administration was consistent with what they’ve said their message over the past year: that the USMCA is a crucial trade agreement and should be “largely preserved” and not be made any stricter.
“The original USMCA negotiating team established a 21st Century, regionally integrated automotive trade framework to ensure that American workers and manufacturers are the primary beneficiaries of U.S. auto industry growth under the USMCA framework,” the American Automotive Policy Council wrote in a Jan. 7 letter. The group lobbies jointly on behalf of Ford Motor Co., General Motors Co. and Chrysler parent company Stellantis NV.
“During the Joint Review discussions with Mexico and Canada, we strongly recommend that the existing frameworks be largely preserved,” AAPC President Matt Blunt said in the letter.
The former Republican governor of Missouri pointed out that the USMCA already has “the strongest content rules of any U.S. trade agreement and that “(t)he USMCA’s automotive chapter is by far the world’s most protective of U.S. manufacturing jobs.”
He also pointed out that Jamieson Greer, Trump’s U.S. Trade Representative, told Congress in written testimony last month that only “rules of origin for non-automotive industrial goods require strengthening.”
GM, in its filing, made no specific recommendations other than generally “updating and clarifying” rules provided they “(1) come with sufficient lead time, (2) are crafted based on robust industry input, and (3) are carefully balanced with supply chain realities.”
The Detroit automaker said the existing deal is achieving Trump’s goal of growing U.S. manufacturing, pointing out that “since the USMCA was ratified, private investment in auto fixed assets was 4 times the investment than in the equivalent prior period. These investments support jobs in all three countries.”
Ford made several suggestions for rule changes in its filing. Most revolved around providing greater incentives or flexibility to companies that exceed existing USMCA requirements.
“Structuring the USMCA to reward high performance, rather than baseline compliance, would offer a tailored and effective response to the wide range of views expressed in the public comment process,” wrote Chris Smith, Ford’s chief government affairs officer.
Neither Stellantis nor the Detroit-based United Auto Workers submitted a new comment, though the UAW did have an active week of policy discussions with top officials.
Union President Shawn Fain visited Washington for a sitdown with Commerce Secretary Howard Lutnick while other UAW staff, including top adviser Jason Wade, traveled to Mexico for a meeting with the country’s federal agency on labor and social welfare.
The UAW has previously called for a makeover of the USMCA, including higher tariffs on Mexico for exporting too large a share of the vehicles it produces. The union said that suggestion is based on the principle of “build here to sell here” and pointed out that Mexico produces 256 vehicles for every 100 sold in the country. The U.S. ratio is 63:100.
Around the industry
Like the Detroit Three, other automakers and trade groups similarly urged the United States to keep the USMCA trade deal largely intact.
Honda Motor Co. asked the Trump administration to “preserve and perfect the successful trilateral USMCA Agreement” and asked USTR to establish an “Automotive Industry Advisory Council” as part of the formal review process.
Michigan-based supplier Lear Corp. expressed strong support for the existing USMCA and noted a recent federal government report showing growth in North America’s automotive supply chain thanks to the deal.
“The effectiveness of the current automotive Rules of Origin and the RVC/LVC thresholds is demonstrated by the 2025 U.S. International Trade Commission survey of 22 light vehicle manufacturers,” Lear CEO Ray Scott wrote.
He continued: “According to the report, automakers have made 68 major sourcing changes, shifting production from global locations back into North America, since USMCA’s announcement in 2018 — over 82% of which were directly attributed to the Agreement’s Rules of Origin.”
SAFE, a nonpartisan organization dedicated to promoting U.S. energy leadership, generally supported the USMCA but also asked for new rules to better trace China’s role in the regional supply chain. The group expressed concern over the country’s growing dominance of electric vehicles and battery technology.
“Manufacturers located in the United States faced the full cost of tariffs on Chinese inputs, while competitors in Canada and Mexico could source the same inputs without those added costs, incorporate them into finished products, and then export those products to the United States without any additional tariffs,” SAFE Executive Director Abigail Hunter wrote.
She continued: “This dynamic risks eroding U.S. competitiveness relative to Canada and Mexico and weakening incentives to locate battery supply chains in the United States, an effect that would have been even more damaging without other domestic policy incentives to partially offset these distortions.”
Her group also pushed for the easing of USMCA requirements around used-vehicle trade to better facilitate recycling of metals and materials within North America.
The full docket of industry comments to the Trump administration is available on the USTR website.
gschwab@detroitnews.com
@GrantSchwab