Among the sticking points emerging during this week’s discussions in Washington between the U.S. and Mexico toward a renewed North American Free Trade Agreement is a proposal by the administration to increase the tariffs on cars imported from Mexico that don’t meet stricter new content rules, according to five people familiar with the discussions.
Even as the U.S. and Mexico have largely finalized a deal on the new auto rules of origin, the U.S. has been pushing for cars that don’t meet the threshold to be subject to a 20-to-25% tariff, according to the people familiar with the talks.
That would represent a major jump from the 2.5% tariff the U.S. charges currently under World Trade Organization rules.
One of the few ways the U.S. could raise the tariffs on cars under WTO rules is by recourse to a Section 232 national security investigation that Trump ordered up in May into auto imports to justify raising import duties.
The threat of the 232 auto tariffs, which are widely opposed by U.S. and international carmakers such as GM, Ford, Toyota and BMW, has been seen as an attempt by the U.S. to build leverage in the Nafta talks. It may be doing precisely the opposite, however, by backing Mexico and Canada into a corner and giving them less room at home politically to make the concessions necessary to reach a deal.
The office of U.S. Trade Representative Robert Lighthizer, who is leading the U.S. negotiating team, did not respond to an emailed request for comment.