Detroit automakers warn trade deal revamp could cost billions

Detroit’s largest automakers have warned that proposed revisions to the U.S.-Mexico-Canada Agreement (USMCA) could impose billions of dollars in additional costs and disrupt North American supply chains.

Ford Motor Co., General Motors Co. and Stellantis NV have privately expressed concerns to U.S. and Canadian officials about the potential economic impact of changes to the trade pact, which governs nearly $1.2 trillion in annual cross-border trade. The companies argue that stricter rules on labor content, higher regional value thresholds and new environmental standards could inflate production costs and reduce competitiveness.

The USMCA, which replaced the North American Free Trade Agreement (NAFTA) in 2020, currently requires 75% of a vehicle’s components to be manufactured in North America to qualify for zero tariffs. The Biden administration has signaled support for increasing this threshold to 80% as part of ongoing reviews of the agreement. Automakers contend that such a move would force them to source more expensive materials or components domestically, driving up costs at a time when they are already grappling with high interest rates and rising labor expenses.

Stellantis, the parent company of Chrysler and Jeep, has estimated that the proposed changes can add up to $5 billion annually across its North American operations. Ford has projected potential cost increases in the billions, while GM has not disclosed specific figures but has warned of significant financial strain. Industry analysts suggest that the cumulative impact could erode profit margins by 2% to 5% for the Detroit Three, depending on the final terms of the revised agreement.

The automakers’ concerns come as the U.S. Trade Representative’s office prepares to launch a public consultation on the proposed revisions later this month. The review aims to assess the feasibility of the changes before formal negotiations with Mexico and Canada begin. Industry groups, including the Alliance for Automotive Innovation, have urged policymakers to balance the need for stricter trade rules with the economic realities facing manufacturers.

A spokesperson for Ford declined to comment on the estimated financial impact but reiterated the company’s commitment to working with regulators to ensure the changes do not undermine the competitiveness of North American auto production. GM and Stellantis did not respond to requests for comment.