The USMCA Advantage: What Businesses Need to Know in 2025

If you’re doing business across North American borders in 2025, you’ve likely heard about the USMCA tariff exemptions. With President Trump’s recent 25% tariffs on Mexican and Canadian imports, understanding USMCA compliance isn’t just good practice—it’s potentially crucial for your bottom line. Let’s break down what you need to know.

What is the USMCA?

The United States-Mexico-Canada Agreement replaced NAFTA in July 2020, modernizing the 25-year-old trade pact for the digital age. While preserving many of NAFTA’s tariff-free provisions, the USMCA introduced important updates:

• Higher regional content requirements for automobiles (75%, up from 62.5%)
• Labor provisions requiring $16/hour wages for certain auto workers
• Enhanced protections for intellectual property and digital trade
• Expanded agricultural market access

Unlike NAFTA, the USMCA includes a sunset clause—it expires in 2036 unless renewed during its formal review in 2026.

Does My Product Qualify Under USMCA?

Qualifying for USMCA benefits requires meeting specific rules of origin, which vary by product:

• Automotive sector: 75% North American content, with 40-45% made by workers earning at least $16/hour
• Textiles and apparel: Special provisions exist through the “Commercial Availability” clause, offering flexibility when certain inputs aren’t available regionally
• Other sectors: Each product category has specific requirements based on its Harmonized System (HS) code

Determining qualification starts with identifying your product’s HS code and reviewing the corresponding rules in the USMCA text.

What Tariffs Can I Avoid?

The stakes are high. President Trump’s February 2025 executive order imposed:

• 25% tariffs on most Mexican and Canadian imports
• An additional 10% on Canadian energy products

However, Commerce Secretary Lutnick announced that exemptions would “likely” cover “all USMCA compliant goods and services.” Several major automakers have already secured temporary exemptions, which gives them a significant competitive advantage in the current market.

USMCA compliance could mean the difference between facing prohibitive tariffs and maintaining market access for Mexico-based exporters.

How Long Will These Exemptions Last?

Let’s be clear: current exemptions are temporary. The one-month reprieves granted to Ford, GM, and Stellantis in March 2025 suggest that the administration may leverage these in broader trade negotiations.

Looking further ahead:

• The USMCA undergoes formal review in July 2026
• If not extended, it expires in 2036

This built-in timeline creates structure but also uncertainty that businesses must navigate.

What About USMCA Renegotiation?

Renegotiation appears likely. President Trump explicitly campaigned to revisit the agreement, and recent tariff actions may represent an opening move in this strategy.

Potential focus areas include:

• Stricter rules of origin, particularly addressing Chinese components entering through Mexico
• Enhanced labor provisions
• Strengthened environmental standards

The process will unfold within a complex political landscape, with President Sheinbaum in Mexico and Prime Minister Carney of Canada navigating their domestic priorities.

Ensuring USMCA Compliance

To capitalize on USMCA benefits, follow these steps:

1. Assess your position:
   • Identify your products’ HS codes and applicable rules of origin
   • Analyze your supply chain against these requirements
   • Calculate regional content percentages
   • Identify compliance gaps
2. Adjust your supply chain if needed:
   • Shift to regional suppliers where possible
   • Restructure manufacturing processes
   • Adjust labor practices for automotive components
   • Document commercial unavailability for specific textile inputs
3. Document everything:
   • Maintain certificates of origin
   • Keep detailed manufacturing records
   • Document cost breakdowns showing regional content
   • Preserve shipping and customs documentation
4. Stay vigilant:
   • Regularly review supplier certifications
   • Update documentation when processes change
   • Monitor regulatory developments

Risks of Non-Compliance

Claiming USMCA benefits without ensuring compliance is a risky business. Authorities can audit your claims through document reviews and facility visits.

Non-compliance can result in:

• Retroactive application of the 25% tariff
• Additional duties, taxes, and interest
• Penalties for false declarations
• Temporary or permanent loss of USMCA privileges

Beyond financial penalties, you risk damaged relationships with customs authorities and customers who expect USMCA-preferential pricing.

Taking the First Step

Ready to secure your USMCA advantage? Start with these actions:

1. Review the USMCA rules specific to your product category
2. Map your entire supply chain, identifying origin for all components
3. Calculate your current regional value content
4. Implement a documentation system to track compliance
5. Consider consulting with trade experts for complex cases

The Bottom Line

In today’s North American trade environment, USMCA compliance represents a significant competitive advantage. While the current exemptions may be temporary and renegotiation looms on the horizon, businesses that proactively establish compliance can now navigate whatever changes come.

With 25% tariffs now applied to non-exempt products, investing in USMCA compliance offers potentially immediate returns. The key is a systematic approach: understanding your requirements, analyzing your supply chain, maintaining proper documentation, and staying informed about developments.

By acting now, you will protect against current tariffs and build the flexibility to adapt as North American trade rules continue to evolve.

At Tijuana EDC, our top-tier professionals are ready to streamline your USMCA compliance and boost your investment success. Contact us today to get started!