US Requires North American Content in All Products to Increase to 65%-75%, Mexico Transshipment and Factory Construction Completely Blocked

Jamieson Greer, the U.S. Trade Representative, reported to the House Ways and Means Committee on December 16, 2025, and to the Senate Finance Committee on December 17, on the operations of the United States-Mexico-Canada Agreement (USMCA) in a closed-door briefing.

U.S. Trade Representative Office Official Announcement

This report aims to assess the effectiveness of the USMCA, propose improvement suggestions, and discuss whether to renew or shift to annual reviews, or directly withdraw from the agreement before the six-year review of the USMCA on July 1, 2026.

The U.S. Trade Representative stated that although the USMCA has value, it will only recommend renewal if issues are resolved; otherwise, it may withdraw directly.

The statement clearly lists the issues that Mexico and Canada need to address, mainly including:

⚠️ Issues that need to be addressed by Mexico:

1. Request Mexico to raise the regional content level of products, mainly reflected in the modification of Rules of Origin (ROO) and Regional Value Content (RVC), increasing the proportion of North American regional content while reducing the proportion of third-party content to meet the requirements of origin rules. This request aims to prevent economies like China from circumventing U.S. tariffs through Mexico and to promote the localization of the North American supply chain.

The most fundamental impact is the tightening of rules of origin and the addition of labor value content requirements, forcing the supply chain of key manufacturing industries (such as automobiles and industrial goods) to shift from Asia to North America.

The United States has reported concerns that Chinese products might enter the U.S. duty-free by being relabeled in Mexico. To prevent this route, the U.S. will push for significantly raising the standards of origin rules and strengthening customs inspections. This means that even if Chinese companies set up factories in Mexico, their products will still not enjoy tariff benefits if they cannot meet the high proportion of North American local materials or high-wage labor, losing their key cost advantage.

2. Regarding automotive products, the United States suggests that Mexico further increase the local content ratio (from the current 65%-75%). The existing RVC requirements for North American sourcing are: core components 75%, major components 70%, supplementary components 65%, and steel and aluminum 70%.

The United States also asks Mexico to strengthen labor and environmental enforcement (including fisheries), address concerns regarding energy policies, stop unfairly granting the EU protection for meat and dairy terms, treat American electronic payment service providers fairly, reduce customs brokerage cost restrictions, and deal with the impact of seasonal agricultural product imports from Mexico.

⚠️ Request for Canada to resolve the issue:

1. A U.S. report criticized Canada's Online Streaming Act and Online News Act for their impact on American companies. This indicates the U.S. intention to establish exclusive rules in areas such as digital services and e-commerce, which may limit the development of Chinese tech companies in the North American market.

The United States also demands that Canada fulfill its commitments on dairy market access, eliminate provincial alcohol distribution bans, remove discriminatory procurement practices, simplify customs registration, and address Alberta's unfair treatment of electricity distributors from Montana.

⚠️ Issues requiring joint resolution by both countries:

1. Strengthen the rules of origin for "non-automotive industrial products," enhance economic security collaboration (tariffs, export controls, investment reviews), establish mechanisms to penalize production relocation due to regulatory arbitrage, create a "critical minerals market" to incentivize critical mineral activities within the region, improve the implementation of forced labor import bans, etc.

The United States requests that the "automotive RVC requirements" be renegotiated to apply to "non-automotive products," raising the RVC thresholds for other industrial goods to automotive levels (65%-75%), prioritizing U.S. raw materials and components. For example, the steel industry suggests strengthening the North American proportion of downstream value chain products; the textile industry calls for tightening the "yarn-forward" rule to restrict non-USMCA components.

Starting January 1, 2026, Mexico will impose import tariffs of up to 50% on nearly 1,463 products, including automobiles, textiles, steel, from Asian countries without trade agreements, including China.

Mexico is transforming into a "nearshore production base" serving the North American industrial chain. Chinese companies, if they wish to benefit from the zero-tariff policy of the USMCA (United States-Mexico-Canada Agreement) and maintain their presence in the North American market, may need to relocate more high value-added, high-tech production processes, or even the entire supply chain, to Mexico or the North American region.