US Truck Manufacturers Shift Production to Mexico Amid Tariff Pressures

US truck manufacturers are increasingly relocating production to Mexico to circumvent steep tariffs on imported materials. Under Section 232 of the Trade Expansion Act, domestic producers face 50% tariffs on steel, aluminum, and copper derivatives, alongside additional duties for non-compliant components under USMCA rules. These costs are eroding competitiveness, prompting firms like Daimler Truck and Traton to expand operations south of the border.

The USMCA allows duty-free movement of goods meeting regional sourcing thresholds—64% North American content for heavy trucks, rising to 70% by 2027. While some, like Volvo’s Mack Trucks unit, continue US assembly in Virginia and Pennsylvania plants, the financial calculus favors Mexican production. Volvo recently boosted its Mexico investment by $300 million to $1 billion, citing cost advantages.

Bernstein estimates US-assembled trucks incur a 3% cost premium versus Mexico-built, USMCA-compliant models. The shift underscores how trade policies are reshaping industrial footprints, with Mexico emerging as a strategic hub for serving the US market.