The automotive sector has been a key target of the Trump administration's trade policy. As a result of Section 232 duties, United States-Mexico-Canada Agreement (USMCA) renegotiation, and antidumping/countervailing duty investigations (AD/CVD), original equipment manufacturers (OEMs) and automotive suppliers have been forced to navigate substantial uncertainty in the market. All parties along the supply chain must closely monitor developments to ensure compliance and take advantage of potential duty savings. This client alert discusses the latest automotive-related trade developments and highlights key milestones in the near future that OEMs and suppliers must track.
Section 232 Duties: The Primary Vehicle for Automotive Tariffs
OEMs and suppliers are likely familiar with the baseline tariff framework targeting completed automobiles, medium- and heavy-duty vehicles, and their parts. Finished vehicles and certain parts enumerated by HTS code, along with parts that importers certify are used for production or repair activities, are generally subject to the duties. This framework was introduced by Proclamation 10908 of March 26, 2025, as amended (the "Autos Proclamation"), for automobiles and parts, and Proclamation 10984 of October 17, 2025, as amended (the "Trucks Proclamation"), for medium- and heavy-duty vehicles and parts.
Beyond this framework, certain duty mitigation measures are available, some of which remain to be implemented:
U.S. Content Deduction for USMCA Autos and Trucks
- Finished Autos and Trucks: The Autos and Trucks Proclamations provide that, for vehicles that qualify for preferential tariff treatment under USMCA, importers may submit documentation identifying the amount of U.S. content in each imported model, and the 25 percent tariff will then apply exclusively to the value of the vehicle's non-U.S. content.
- Auto and Truck Parts: The Autos and Trucks Proclamations provide that parts will be subject to a similar tariff framework, but only after a process is established. Currently, parts qualifying for USMCA treatment are exempt from the Section 232 duties unless and until a process is established.
Duty Offset Mechanism: MSRP Credits for Autos and Trucks Manufactured in the United States
The Autos and Trucks Proclamations also provide for an import-adjustment credit that qualifying U.S. vehicle manufacturers can use against Section 232 duties on covered auto or truck parts.
- Autos: Manufacturers may apply for an offset equal to 3.75 percent of aggregate MSRP for U.S.-assembled vehicles from April 3, 2025, through April 30, 2026, and 2.5 percent from May 1, 2026, through April 30, 2027.
- Trucks: Manufacturers may apply for an offset equal to 3.75 percent of the aggregate MSRP for U.S.-assembled trucks from November 1, 2025, through October 31, 2030.
Once manufacturers apply for and obtain the MSRP credits, they can assign licenses to authorized importers of record. Those authorized importers of record may then use the approved amount only against that manufacturer's Section 232 auto-parts tariff liability.
USMCA Remains in Place, With Automotive Rules at the Center of Renegotiation
On July 1, 2026, U.S. Trade Representative Jamieson Greer confirmed that the U.S. did not agree to renew USMCA in its current form. However, nonrenewal is not termination. Instead, USMCA is now subject to annual reviews until it expires in ten years.
The substance of the first review is already underway, and the automotive sector sits at its center. The first two bilateral U.S.-Mexico rounds took place May 28 – 29 and June 16 – 17, 2026.
The principal automotive proposals on the table include:
- Raising regional value content (RVC): The U.S. has proposed increasing the North American content threshold for vehicles from the current 75 percent to 82 percent.
- A new U.S.-specific content requirement: For the first time, the U.S. has proposed that 50 percent of a qualifying vehicle's content be U.S.-origin, constituting roughly half of the 82 percent North American content requirement.
- Higher thresholds and new rules for EVs: Proposals include raising RVC above 75 percent for EV components and adding battery-specific and battery-component-specific origination rules.
- Tighter steel and aluminum origin rules: A comprehensive "melted and poured" and "smelt and cast" requirement would ensure qualifying metal is produced entirely in North America, coupled with pressure on Mexico to align its external steel tariffs with U.S. rates to curb indirect Chinese entry.
- Curbing Chinese transshipment and offshoring: The U.S. seeks to expressly prohibit or limit routing Asian-origin core parts through Mexico for assembly into otherwise qualifying vehicles, along with penalty provisions targeting the offshoring of U.S. production.
- Reversing the core-parts "roll-up" ruling: Textual changes would overturn the automotive rules-of-origin panel decision so that non-originating value embedded in core parts carries through to the vehicle-level RVC calculation.
AD/CVD and the Auto Industry
In addition to the interplay between Section 232 and USMCA, AD/CVD duties must remain a constant concern for OEMs and suppliers. AD/CVD investigations are key trade remedies that can be leveraged by U.S. manufacturers for relief. Manufacturers can petition the International Trade Commission (ITC) and the Department of Commerce (DOC) to initiate investigations when imports are dumped or subsidized and injure domestic industry. If successful, the cases can result in product- and company-specific duties that can be imposed within months, remain in place for at least five years, and often last much longer.
Current active AD/CVD duties targeting the auto and truck industry include van-type trailers and subassemblies thereof from China, Canada, and Mexico, as well as truck bed covers from China. In addition, past investigations in which AD/CVD orders have been issued and duties imposed concern the auto and truck industry, such as certain steel wheels, tires, chassis and subassemblies, vertical engine shafts, and brake drums.
Awareness of AD/CVD duties is critical, as they stack with all duties imposed during the second Trump administration, and failure to pay them carries substantial risk. Penalties for non-payment are severe and U.S. Customs and Border Protection is increasing enforcement.
Keys for Importers Going Foward
Importers, OEMs, and suppliers should reassess origin claims, document U.S. and regional content, model tariff exposure, monitor USMCA negotiations and AD/CVD proceedings, and prepare compliance records before scrutiny by U.S. Customs and Border Protection or the DOC begins. Companies should also consider reviewing supplier certifications, purchase agreements, and customs entry procedures to ensure that duty-mitigation opportunities are preserved. Any changes should be made with consideration of the current environment of increasing customs enforcement, as we have reported.
Baker Donelson's International Trade and National Security Team will continue to monitor trade developments impacting the automotive sector and provide updates as warranted. If you have any questions or would like to discuss this in further detail, please reach out to P. Lee Smith, Matthew McGee, or any member of the International Trade and National Security Team.