While Ford and GM get a temporary reprieve from immediate competition, the tariff-driven spike in production costs for their own imported parts is hampering their profitability, with analysts indicating that the "made-in-America" strategy is not insulating them from rising costs. Their profitability selling all those trucks and SUVs is pretty high though.
“Foreign-based automakers have warned the Trump administration that they are looking at pulling their cheapest car models out of the U.S. market if the U.S.-Mexico-Canada Agreement isn't renewed or is watered down, according to people familiar with the discussions.
Companies such as Nissan, Hyundai and Toyota are among the few carmakers to offer U.S. consumers new models of small, affordable automobiles after Detroit-based automakers ditched such cars in recent years in favor of SUVs and trucks.
Cars like the Honda Civic and Toyota Corolla are made in the U.S., but rely on parts from all three North American countries. President Trump signed the USMCA in 2020 and provided tariff-free treatment to cars built largely with U.S., Mexican or Canadian parts.
Trump, however, has upended supply chains and cut into foreign automakers' profits with his second-term levies, which charge a 25% tariff on the non-U.S. content of vehicles that previously would have qualified as duty-free under the USMCA deal. Trump has said the levies are needed for national security, and his team has publicly considered ditching the USMCA or splitting it into two separate deals as the governments review the agreement this year.
White House spokesman Kush Desai said the administration's strategy to restore manufacturing includes giving "breathing room" to companies that are in the process of reshoring. He said: "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 -- and the administration is rolling out the red carpet with deregulation, tax cuts, and other pro-investment policies to support this transition."
But if USMCA no longer exists or a renewed version doesn't significantly reduce tariffs on cars and auto parts made in North America, some foreign carmakers might not be able to build and sell the cheaper cars for the U.S. market, the people familiar with the discussions said. That message has been communicated to Trump's economic advisers, according to the people.
"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, a trade group for foreign automakers in the U.S.
The average price of a new car hovers around $50,000. More affordable options include the Mexico-built Nissan Sentra, starting at $22,600, and the $20,550 Hyundai Venue, imported from Korea.
Eight of the 10 cheapest new models in the U.S. are made by foreign-based automakers, according to Edmunds, an online car-shopping guide. The other two are small SUVs made by General Motors in Korea.
Trump's team so far has not committed to providing tariff-free treatment for automobiles in a revised USMCA. Administration officials have said that any renewed USMCA deal must have tougher automobile rules that limit Chinese parts in qualifying cars and require more automobile and parts manufacturing to return to the U.S.
Foreign automakers, however, say they are already losing money on many of their cheapest models, thanks in part to Trump's second-term tariffs. Levies on auto parts, finished automobiles and metals such as steel and aluminum have combined with higher labor and other costs in the U.S. to make it unprofitable for automakers to build their cheapest models in the country, some executives have said.
Tariffs have been "killing our affordable cars," Nissan Americas Chairman Christian Meunier said in a recent interview. A deal on USMCA will help ease the pain, he said.
Toyota has been racking up losses in North America since tariffs took effect last year. The automaker, which has said it plans to spend up to $10 billion on new U.S. factories in the next decade, is wary about a major expansion in the current trade environment, U.S. sales chief David Christ said. "It's hard to say, 'let's throw that $2-$3 billion down right now,' until you get some sort of a settlement," he said. "USMCA is kind of the next big milestone."
Honda said it would continue selling the compact Civic in the U.S. even without a trade deal, but that the economics of doing so would become more difficult without the certainty of free trade among North American nations.
"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, general director of the Japan Automobile Manufacturers Association, a trade group.
The administration has provided some limited tariff relief to automakers, such as allowing them to recoup some of the tariffs they pay on parts. Last week, the administration allowed Canadian and Mexican steel and aluminum companies that supply the auto industry to apply for lower tariffs if they commit to build more manufacturing facilities in the U.S.
Carmakers complain that those measures remain narrow and their tariff bills continue to mount. They argue that persisting duties on cars made in Canada and Mexico put them at a disadvantage compared with affordable vehicle models made in Japan and South Korea -- which are subject to a 15% duty but often cost less to build.
U.S. Trade Representative Jamieson Greer told House lawmakers last week that the U.S. could impose tariffs on Canada due to bans on U.S. liquor in some provinces that were put in place in response to Trump's levies. Greer told Mexican officials in meetings last week that some level of tariffs are likely to persist in a revised USMCA, according to a Mexican official familiar with the matter. Last week, Canada's trade chief said relief from tariffs on automobiles, steel, aluminum and other sectors would be necessary to renew the USMCA.
Mexico's economy chief said last week his country shouldn't be "nostalgic" about an era of no tariffs, and instead is working on how to reduce any levies the U.S. wants to impose.” [1]
1. Cheap Cars At Risk in Trade War, Foreign Brands Say. Sharon Terlep in Detroit; Bade, Gavin. Wall Street Journal, Eastern edition; New York, N.Y.. 28 Apr 2026: A1.
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