Foreign automakers warned the Trump administration that they may pull their cheapest car models out of the U.S. if its free trade deal with Mexico and Canada isn't renewed or is watered down, The Wall Street Journal reported, citing people familiar with the talks.
Toyota (TM), Honda (HMC) and Nissan (NSANY) are among the few companies that offer new models of small, affordable cars in the U.S. as Detroit automakers focus more on SUVs and trucks.
Cars like the Toyota Corolla and Honda Civic are manufactured in the U.S. but require parts from all three North American countries.
Some foreign automakers may not be able to make and sell such cars for the U.S. market if the U.S.-Mexico-Canada Agreement is scrapped or if its renewed version doesn't significantly lower auto tariffs.
Honda (HMC) said it would continue selling its compact Civic in the U.S. even without a trade deal, although the economics of doing so would become more difficult without the USMCA.
Eight of the 10 cheapest new car models in the U.S. are made by foreign automakers, according to online car-shopping advisor Edmunds, and the other two are compact SUVs made by General Motors (GM) in South Korea.
The Trump administration signaled that any renewed USMCA must have tougher rules to limit Chinese parts in qualifying cars and reshore U.S. manufacturing. It hasn't committed to providing tariff-free treatment for vehicles in a revised USMCA.
Foreign automakers are already losing money because of President Trump's tariffs on auto parts, finished automobiles, steel and aluminum. The tariffs, combined with higher labor and other costs in the U.S., make it unprofitable to build their cheapest models in the U.S.
Executives at Nissan (NSANY), Toyota (TM) and Honda (HMC) have backed extending the USMCA to help ease costs. The deal is due for joint review in July.
