Understanding the New Trade Regulations
On Tuesday, President Donald Trump signed a proclamation affecting the automotive industry in the United States. This new regulation provides Mexican and Canadian auto parts with a tariff advantage over global competitors, while still imposing a 25% tariff on steel and aluminum imports from these countries.
Tariff Advantage for Mexican and Canadian Auto Parts
According to Mexico’s Secretary of Economy, the new measures grant preferential tariff treatment to Mexican exporters for specific components such as motors, harnesses, suspensions, and others manufactured in North America. These parts, when used in light vehicle assembly in the US, will now be exempt from accumulated tariffs.
Ansley, a consulting firm, explained that Mexican and Canadian imports of vehicles, light trucks, and auto parts not originating from the US-Mexico-Canada Agreement (T-MEC) are also exempt from the additional 25% tariff under the International Emergency Economic Powers Act (IEEPA). However, these imports still face the 25% tariff under section 232 for steel and aluminum products.
Tariffs on Non-T-MEC Imports
Ansley further clarified that products and derivatives of aluminum from around the world will be subject to the additional 25% tariff under section 232 for aluminum, as well as the section 232 tariff for steel and steel derivatives.
Worldwide imports of steel products and derivatives will face the additional 25% tariff under section 232 for steel, and also be subject to the section 232 tariff for aluminum products, provided they meet the necessary conditions.
Accumulative Tariffs
It’s important to note that if an imported product is eligible and covered in both proclamations, the tariffs will be cumulative. Any other tariffs not part of the executive orders and proclamations setting additional tariffs on previous products will still be cumulative.
These additional tariffs or taxes, such as the Most-Favored-Nation (MFN) tariffs, Section 301 duties under the 1974 Trade Act, taxes addressing the synthetic opioid supply chain in the People’s Republic of China, and anti-dumping duties, will still apply.
Amendments to the US tariff to comply with these new regulations will be implemented by May 16.
Key Questions and Answers
- What is the main change in the US automotive industry regulations? Mexican and Canadian auto parts will have a tariff advantage over global competitors, while still facing a 25% tariff on steel and aluminum imports from these countries.
- Which specific components benefit from preferential tariff treatment? Motors, harnesses, suspensions, and other components manufactured in North America used in light vehicle assembly in the US.
- What tariffs still apply to Mexican and Canadian imports? The 25% tariff under the International Emergency Economic Powers Act (IEEPA) for non-T-MEC vehicle, light truck, and auto part imports.
- What tariffs remain unchanged? Other tariffs, such as Most-Favored-Nation (MFN) tariffs, Section 301 duties, taxes addressing the synthetic opioid supply chain in China, and anti-dumping duties.
