The current situation has us all feeling somewhat uncertain and nervous. But these are situations we have to deal with and navigate as best we can to turn them to our advantage—once we have a broad overview of the issue and understand the strategic impact of this review, particularly for the automotive industry.
My name is Jorge Torres; I am a U.S. customs broker. I have over 30 years of experience in the logistics and customs industry, having worked with IMMEX companies in the automotive and telecommunications sectors. So, we are quite familiar with the subject matter—especially customs issues.
Regarding the current situation: the agreement has an expiration date—or rather, a date when it must be renewed—of June 30, 2036. That gives the program a 16-year lifespan. Within the agreement, there is a "sunset clause" that allows for a review of its implementation—generally scheduled for 2026.
An unofficial date of July 1st is often cited because that was when the agreement originally took effect, so there is a six-year window to conduct this review.
And what does this review—this sunset clause—actually entail?
Well, the goal of the official review process is to request an extension of the USMCA for another 16 years. However, we know the United States hasn't done that yet and likely won't, unless there are significant changes—which we’ll discuss in more detail later.
So, it will proceed via annual reviews until 2036—or until the three countries agree to an extension, whichever comes first—to confirm a renewal for another 16 years. But the agreement remains in effect until 2036; we need to be clear about that.
The expectation—or the goal—is that this year, the agreement will be renewed and extended for another 16 years. That is the best-case scenario, and it would provide the certainty that many companies are looking for.
Unfortunately, however, we do not believe that is how it will play out. Many analysts, consultants, and even government officials have noted that it is unlikely an official notification regarding a renewal will be issued this year.
Meetings are scheduled between the USTR and the Secretariat of Economy for next week, followed by another round of meetings—this time in Washington.
Next week, the focus will be heavily on the rules of origin, and subsequent meetings are set for July 20. This places us in a situation where we know there will be no final decision by July 1.
Something might happen late in the year or in early 2027, but all signs point to a shift toward annual reviews until an agreement is reached.
There are, of course, other options; as many of you know, each country has the right to withdraw from the treaty with six months' notice. Such a move would force a review and necessitate bilateral negotiations between the respective countries—US-Mexico, US-Canada, and Canada-Mexico. Thus, if one of the three countries were to withdraw with six months' notice, it would trigger these bilateral negotiations or agreements.
While I consider this scenario unlikely, it remains a possibility. Yesterday, many of you heard President Trump—who often makes such remarks—say that he might pull out of the agreement. Unfortunately, comments like these breed uncertainty; while they are clearly just remarks—often used as a negotiating tactic—the fact that the President mentioned it yesterday does increase the likelihood of such an event.
Still, it is a scenario that could unfold and one we must keep in mind, given the ongoing uncertainty that has persisted since the President took office last year.
Now, regarding the primary impacts on the automotive industry: we know that the United States holds the upper hand in this renegotiation process. That is no secret, and I believe it is not open to debate. The United States is exerting significant pressure, particularly regarding changes to the rules of origin.
What is President Trump’s objective? First and foremost, to boost production and manufacturing within the United States; he is using tariff-related pressure to achieve this. His foreign trade policy has relied heavily on tariff pressure—we know about measures like Section 232, and we could discuss at length how the government has politicized the application of tariffs and duties.
However, focusing on the USMCA review and its impact on the automotive industry: one of the fundamental changes the U.S. is demanding for the agreement's continuation is raising the regional value content requirement for North American-produced vehicles to 82%—up from the 75% established during the original USMCA negotiations. There is also a requirement for a minimum of 50% U.S.-originating content. Furthermore, there are mandates for 40% labor value content and 70% metal content (aluminum and steel), in addition to the aforementioned increase in regional content to 75%.
An interesting development occurred last April when the U.S. Trade Representative (USTR) released a report citing various countries—including Mexico—and highlighting trade barriers related to bureaucracy, labor laws, judicial reform, environmental regulations, and so on. Essentially, the U.S. is telling Mexico: "You must change; you have to modify this, that, and the other thing" as a condition for renewing the USMCA. So, these are issues being addressed one by one; however, regarding preferential treatment and trade, the rules of origin—specifically the changes concerning auto parts—are fundamental to increasing component production in North America, including greater component manufacturing and final vehicle assembly in the United States.
Consequently, there will be a shift in the production of both vehicles and auto parts within North America, with a specific focus on the United States. This is critical for the automotive industry, as companies must now carefully consider their supply chain strategies and determine where to expand or establish production plants to meet these percentage requirements. While not yet formalized, all signs point in that direction—give or take a percentage point—indicating a definite increase in regional content and a requirement for a minimum level of U.S.-origin content. Faced with this, companies need to develop a clear vision and strategy to ensure compliance. Some very detailed statistics have already been presented.
Here is an overview of the current situation for Mexico. Auto parts production in Mexico from January to March 2026—specifically focusing on auto parts—saw exports totaling $10.92 billion, a 7.93% increase compared to March 2025; notably, 75.4% of these Mexican auto part exports were destined for the United States. This is a critical figure, as the majority of auto parts produced in Mexico are bound for the U.S. market. While the auto parts industry did slow down due to U.S. tariffs, we are seeing a recovery in momentum. Another important point involves the 25% tariff on aluminum—a more technical and complex issue—but we know (and this is a point Secretary Ebrard has raised) that other regions, such as Taiwan, the European Union, and South Korea, have negotiated specific tariff arrangements with the United States. Therefore, alongside negotiations regarding rules of origin and other USMCA provisions, Mexico must also negotiate to have Section 232 tariffs set at 15% or lower to remain competitive. While a USMCA agreement ensures the continuation of zero-tariff trade in most cases, Section 232 tariffs—as previously mentioned—do not simply disappear for any country. Consequently, for Mexico to remain competitive, its tariffs must match or be lower than those of other countries. This is the crucial point where many argue Mexico needs to negotiate with the United States.
It’s not quite the same situation anymore; initially, the goal was to match or even undercut other countries to maintain competitiveness. Now, other issues have arisen—such as Section 301 tariffs and forced labor regulations—where a 10% threshold is being proposed for Mexico (though excluding USMCA-compliant goods, which account for about 85% of trade). So, it is crucial that this be negotiated effectively, alongside the rules of origin percentages we discussed—though I don't see much wiggle room there.
Given this outlook, what are the options for the auto parts industry? Manufacturers will need to consider establishing operations within the USMCA region, particularly in the United States. They have to look at the big picture: "I already have plants in Mexico, but to meet the new USMCA rules of origin, I might need to locate some production in the U.S. as well."
So, what do we offer here in the McAllen/South Texas area? Proximity to Mexico and dual-production capabilities; companies can shift production lines to ensure compliance with USMCA preferential rules of origin. We offer a skilled workforce, competitive labor costs, and ample industrial space—there is plenty of land available in areas like Mission and McAllen. There are government incentives—such as significant funding for workforce training—and, as mentioned earlier, excellent logistics and transportation infrastructure, including air, land, and maritime connections. This is driving shifts in capital investment and new industrial capacity, moving beyond mere logistics and warehousing toward actual manufacturing. We are seeing a major regional push to pivot and prepare for industrial growth—including in the automotive sector—covering production, assembly, job creation, and higher value-added activities.
Well, you’ve seen the presentation; we have all these bridges, airports, and seaports—as well as railway connections—so there are plenty of options for achieving efficient logistics and enabling global production. It is certainly something to consider, and I hope you found it interesting. I believe we are running short on time—I’m being signaled to wrap up—but this is the information I wanted to share with you.
Editor's Note: The above commentary was provided by Jorge Torres, president and founder of Interlink Trade Services, a customs brokerage based in McAllen, Texas. Torres delivered his remarks at an event hosted by the Council for South Texas Economic Progress. The event included a visit by a delegation of auto manufacturers and supplies based in San Luis Potosí. It was held at the Cambria Hotel in McAllen. Click here to watch Torres make his presentation in Spanish.
Editor's Note: RGG Business Journal reporter Daniela Capistran assisted with this story from Brownsville, Texas.
