Foreign automakers have warned the Trump administration they may pull some of the cheapest car models from the U.S. market if the United States-Mexico-Canada Agreement is not renewed or is weakened, according to people familiar with the discussions.
Companies including Nissan, Hyundai, and Toyota are among the few still offering new small affordable vehicles to U.S. consumers after Detroit-based automakers shifted away from compact cars in favor of SUVs and trucks.
"U.S. automakers cannot continue to produce affordable options for American consumers without the certainty and scale provided by a trilateral USMCA," said Jennifer Safavian, president and chief executive of Autos Drive America, which represents foreign automakers operating in the United States, reports The Wall Street Journal on Tuesday.
While models such as the Honda Civic and Toyota Corolla are assembled in the United States, they rely heavily on parts sourced across North America.
The USMCA, signed by President Donald Trump in 2020, allows tariff-free treatment for vehicles built largely with U.S., Mexican, or Canadian components.
Trump's second-term automotive tariffs have disrupted that system, imposing a 25% levy on the non-U.S. content of vehicles that previously qualified as duty-free.
The administration has said the tariffs are necessary for national security and has considered either scrapping the agreement or splitting it into separate bilateral deals as part of an ongoing review.
If a revised USMCA fails to significantly reduce tariffs on vehicles and parts, some foreign automakers may find it unprofitable to continue producing low-cost models for the U.S. market, the sources said. That warning has been relayed to Trump's economic advisers.
White House spokesman Kush Desai said the administration's approach is aimed at restoring domestic manufacturing while supporting companies transitioning production back to the United States.
"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 United States," Desai said. "The administration is rolling out the red carpet with deregulation, tax cuts, and other pro-investment policies to support this transition."
The potential loss of lower-priced vehicles could complicate the administration's efforts to address cost-of-living concerns.
The average price of a new car is about $50,000, putting many vehicles out of reach for U.S. buyers.
Among the more affordable options are the Mexico-built Nissan Sentra, starting at $22,600, and the Hyundai Venue, imported from South Korea, starting at $20,550.
Eight of the 10 least expensive new vehicles in the U.S. are produced by foreign-based automakers, according to Edmunds. The remaining two are small SUVs made by General Motors in South Korea.
Administration officials have said any updated USMCA must include stricter rules limiting Chinese content in vehicles and requiring more production to take place in the United States. However, they have not committed to restoring tariff-free treatment for automobiles.
Foreign automakers say tariffs on vehicles, parts, steel, and aluminum — combined with higher labor and operating costs in the United States — have made entry-level models increasingly unprofitable.
Tariffs have been "killing our affordable cars," Nissan Americas Chairman Christian Meunier said in a recent interview.
Toyota has also reported losses in North America since the tariffs took effect last year. The company has outlined plans to invest up to $10 billion in U.S. manufacturing over the next decade, but executives have signaled hesitation amid uncertainty over trade policy.
"It's hard to say, 'Let's throw that $2 [billion]-$3 billion down right now,' until you get some sort of a settlement," said David Christ, head of Toyota's U.S. sales operations. "USMCA is kind of the next big milestone."
Honda said it would continue selling the Civic in the United States even without a trade agreement, though executives noted that the economics would become more challenging without stable, tariff-free trade across North America.
"Extending the USMCA would provide the necessary stability for Japanese-brand automakers to continue to provide a wider variety of choices to consumers," said Anita Rajan of the Japan Automobile Manufacturers Association.
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