According to estimates by the Congressional Budget Office (CBO), the revised USMCA trade agreement could increase tariff costs on automakers by nearly $3 billion over the next 10 years. This figure was included in the cost estimate of implementing the new USMCA agreement by the CBO.

Automakers requiring tariff exemption to supply to the US, Mexico and Canada should utilize around 75% of components sourced regionally. This figure has been hiked up since the previous trade agreement, NAFTA, in which the regional content requirement for tariff exemption stood at 62.5%.

The USMCA also specifies that automakers must source 40-45% of their content from regions where workers receive higher wages, upwards of $16 per hour, which would need these parts to be sourced either from the US or from Canada. Vehicles manufactured in Mexico or using components sourced from Mexico will have to pay tariffs for access to US and Canadian markets.

This updated criteria could see a potential decline in tariff-free imports of automobiles and auto parts from Mexico and Canada as automakers attempt to maintain their tariff exemptions. There could also be an increase in manufacturing of components within the US as a result of this new provision in the updated USMCA.