USMCA Auto Rules of Origin Report

The U.S. International Trade Commission (USITC) today released its second biennial report on the economic impact and operation of the United States-Mexico-Canada Agreement (USMCA) automotive rules of origin (ROOs), mandated under Section 202A(g)(2) of the USMCA Implementation Act.

The investigation (No. 332-600) offers a detailed, data-driven analysis of how the ROOs have shaped U.S. competitiveness, investment, trade flows, and tariff classification practices.

The USITC’s updated economic modeling indicates that while the ROOs have had “concentrated effects on the U.S. automotive industry,” their overall impact on the U.S. economy is negligible.

According to the report, the rules increased employment, production, revenue, capital expenditures, and profits for U.S. parts and materials producers, while slightly reducing these same metrics for light vehicle producers.

The Commission found that the ROOs reduced imports of light vehicles from Canada and Mexico and increased imports from non-USMCA countries. Simultaneously, average U.S. vehicle prices rose slightly. In survey responses, most firms reported that sourcing adjustments to comply with ROOs increased production costs, though some noted cost neutrality or savings.

On investment trends, the report notes a dramatic fluctuation: U.S. automotive manufacturing investment rose from $27.9 billion in 2019 to $87.8 billion in 2023, before falling to $34.1 billion in 2024. The Commission attributes this in part to ROO compliance-driven investments in parts manufacturing.

From a competitiveness standpoint, three core factors—cost, investment, and product differentiation—are identified as most affected by the ROOs.

The U.S. market share in domestic vehicle sales and parts consumption has held steady since the USMCA took effect in 2020, but production indicators diverged: U.S. light vehicle production has increased but remains below 2019 levels, whereas U.S. parts production, particularly for core components, has exceeded 2019 levels.

International competitiveness results are mixed. “There is little change in U.S. vehicle market share in Canada and Mexico,” the report notes, while the U.S. share of auto parts imports rose in Canada and declined in Mexico. Export share to non-USMCA countries remained stable from 2019 to 2024.

While other factors—including the Inflation Reduction Act, labor strikes, and macroeconomic conditions—had greater individual impacts on the industry, “no single factor was more impactful than the ROOs,” the Commission stated.

The report also flags the continued relevance of technological divergence, where innovations in vehicle design and production have led to complications in tariff classification under the USMCA ROOs. Examples include electric pickup truck production, e-axles, and emerging battery chemistries, which are increasingly inconsistent with existing tariff treatment categories.

The Commission has supplemented the report with an interactive online dashboard offering access to U.S. automotive trade data. The full report, USMCA Automotive Rules of Origin: Economic Impact and Operation, 2025 Report (USITC Publication 5642), is publicly available [here] and at www.usitc.gov. Three additional reports will follow in 2027, 2029, and 2031.