Fact Sheet: President Donald J. Trump Adjusts Tariffs on Canada and Mexico to Minimize Disruption to the Automotive Industry

TLDR

This “fact” sheet attempts to justify the executive order that adjusts tariffs on Canada and Mexico to protect the U.S. automotive industry while maintaining pressure regarding border security concerns. The new structure includes: 25% tariffs on goods not satisfying USMCA rules of origin, 10% tariffs on Canadian energy products and potash outside USMCA preference, and no tariffs on USMCA-qualifying goods. This represents a shift from the near-universal 25% tariffs imposed in February 2025.

President Trump has announced adjustments to the tariffs previously imposed on Canada and Mexico, specifically tailored to protect the U.S. automotive industry while maintaining pressure on these countries regarding border security concerns.

The adjusted tariff structure now includes:

• 25% tariffs on goods from Canada and Mexico that do not satisfy USMCA rules of origin
• 10% tariffs on Canadian energy products that fall outside USMCA preference
• 10% tariffs on potash from Canada and Mexico that falls outside USMCA preference
• No tariffs on goods that qualify for USMCA preference

These adjustments represent a significant change from the initial February 1, 2025 executive orders that imposed near-universal 25% tariffs on Mexican goods and most Canadian goods (with Canadian oil and energy exports receiving a 10% tariff).

This tariff adjustment follows a month of trade tensions that began when Trump signed executive orders on February 1, 2025, imposing broad tariffs on Canada and Mexico, citing concerns about illegal immigration and fentanyl trafficking. The original tariffs were implemented under the International Emergency Economic Powers Act (IEEPA).

The automotive industry has been particularly vulnerable to these tariffs due to the integrated nature of the North American automotive supply chain. The USMCA automotive rules of origin are already among the most stringent of any trade agreement, requiring:

• Regional Value Content (RVC) requirements of 75% for passenger vehicles and light trucks (up from 62.5% under NAFTA)
• Specific “core parts” requirements
• Requirements that 70% of steel and aluminum purchases originate in North America
• Labor Value Content rules requiring certain production by employees making at least $16 per hour

The tariff adjustments appear designed to balance two competing priorities:

1. Maintaining pressure on Canada and Mexico regarding border security and drug trafficking
2. Protecting the U.S. automotive industry from supply chain disruptions

Without these adjustments, the automotive industry faced potential significant disruption. Ontario Premier Doug Ford had warned that the auto sector would last approximately 10 days before assembly lines in both the U.S. and Canada would start shutting down.

The adjustments acknowledge the reality that the North American automotive supply chain is deeply integrated, and disrupting it would harm U.S. manufacturers and potentially cost American jobs. By exempting goods that satisfy USMCA rules of origin, the administration is allowing the continued flow of components that already meet the stringent regional content requirements.

However, the 25% tariffs on non-USMCA compliant goods still maintain significant pressure on both countries, particularly Mexico, whose economy faced risks of “severe recession” under the full tariff regime.

These tariff adjustments represent a more targeted approach than the initial broad tariffs, attempting to use economic leverage while minimizing domestic economic damage.