Several carmakers, including Nissan, Hyundai and Toyota, have cautioned that entry-level vehicles could disappear from the US market if the US-Mexico-Canada Agreement (USMCA) is not renewed or is substantially diluted, The Wall Street Journal (WSJ) reported.
The companies are among a shrinking group still selling affordable smaller cars in the US, after local manufacturers have increasingly concentrated on SUVs and pickup trucks.
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According to sources, automakers have told the administration’s economic team that if USMCA is scrapped or changed without major tariff relief for vehicles and parts, some overseas manufacturers may no longer be able to build and sell lower-priced cars in the US.
Vehicles such as the Honda Civic and Toyota Corolla are built in the US but depend on parts moving across North America under the current USMCA framework.
The trade pact, signed by the US President Donald Trump in 2020, allows tariff-free treatment for vehicles made largely with components from the US, Mexico or Canada.
But automotive tariffs introduced during the administration’s second term now place a 25% duty on non-US content in vehicles that had previously entered duty-free, affecting long-established supply arrangements.
Responding to the issue, White House spokesman Kush Desai told the WSJ: “While the Administration continues to review USMCA, automakers who want to sell to American drivers need to come to terms with the need to reshore their manufacturing back to the US – and the Administration is rolling out the red carpet with deregulation, tax cuts, and other pro-investment policies to support this transition.”
The prospect of fewer budget models comes at a time when vehicle affordability remains under pressure. The average price of a new car in the US is about $50,000.
Among the cheaper models still available are the Nissan Sentra, built in Mexico and priced from $22,600, and the Hyundai Venue, imported from Korea with a starting price of $20,550.
Officials involved in the policy review have signalled that any updated USMCA would need tougher automotive provisions, including tighter restrictions on Chinese parts and stronger requirements for production in the US.
Automakers, however, say the existing duties on vehicles, components, steel and aluminium, together with rising labour expenses, have already undermined the economics of selling entry-level cars.
The administration has not yet said whether a revised USMCA would continue to provide tariff-free treatment for automobiles.
Honda said it will keep selling the Civic in the US even if no trade deal is reached, though losing guaranteed North American free trade would make the car less profitable to sell.
The administration has offered automakers only limited tariff breaks, while ongoing duties on North American vehicles still leave them facing rising costs and a competitive disadvantage against cheaper imports from Japan and South Korea.
