14 August 2026
Executive Summary
Major US automakers are warning that proposed changes to the North American trade agreement could add at least $2 billion in annual costs for each of Detroit’s largest manufacturers.
One proposal being discussed would require vehicles to contain at least 50% US-made content to qualify for favourable tariff treatment, alongside proposals to raise the overall North American-content requirement beyond its current 75%.
The current US-Mexico-Canada Agreement already requires 75% North American regional value content for passenger vehicles and light trucks, as well as separate requirements covering key components, steel and aluminium.
The broader lesson extends far beyond automotive manufacturing:
A supply chain can be perfectly legal and commercially efficient today—and become substantially more expensive following one change to rules of origin.
UK Impact
UK companies supplying North American customers may be affected where their products form part of:
- Automotive components.
- Machinery.
- Electronics.
- Advanced batteries.
- Steel products.
- Aluminium products.
- Engineering assemblies.
- Industrial equipment.
A UK component that currently fits economically into a North American production chain could become less attractive if customers must increase domestic or regional content.
The issue also affects businesses considering new factories or supplier relationships.
A procurement strategy based solely upon today’s tariff structure may not remain viable over the life of a five- or ten-year investment.
Global Impact
General Motors expects tariffs to cost it between $2.5 billion and $3.5 billion this year, while Ford has estimated a net tariff impact of around $1 billion. Ford has already said tariffs were one factor behind its decision to move production of certain Lincoln models for the US market from China into American plants.
This illustrates how trade rules can change:
Factory location → supplier choice → component origin → investment decisions.
The effect then cascades through thousands of smaller suppliers.
Rules-of-origin requirements are particularly important because they can affect whether a product qualifies for preferential tariffs even where final assembly occurs inside the relevant trade region.
Our View
Businesses should treat trade-agreement rules as changeable commercial assumptions, not permanent foundations.
Companies should:
- Map country of origin for critical inputs.
- Identify contracts dependent upon preferential tariff treatment.
- Model the impact if local-content thresholds rise.
- Review who bears additional tariff costs.
- Include change-in-law provisions within long-term supply agreements.
- Avoid locating production solely to capture one tariff advantage.
- Assess whether alternative regional suppliers genuinely have capacity.
- Understand rules governing key components, not simply final assembly.
- Review future investment decisions against several possible trade-policy scenarios.
- Keep evidence supporting origin calculations.
The strategic question should be:
“Does this supply chain still make economic sense if the rules change?”
If the answer has never been tested, the business is relying upon a political assumption rather than a resilience plan.
Risk Indicator: ELEVATED
Disclaimer
The information contained within these Market Alerts is provided for general market awareness and informational purposes only. It does not constitute financial, legal, investment, regulatory or insurance advice. Whilst every effort has been made to ensure accuracy at the time of publication using multiple reputable and independently verified sources, geopolitical events, legislation, regulation and market conditions may change rapidly. Readers should obtain appropriate professional advice before acting upon any information contained herein.
Invictus Risk Solutions LLP – Helping organisations stay ahead of emerging risks through informed insight and independent analysis.