Chinese Automakers Sigh, Auto Giants Accelerate Towards US

Written By | Liu Ying

Editor | Huang Dalu

Designer | Zhen Youmei

On August 24, 2026, Trump posted on social media announcing that, due to dissatisfaction with the massive trade deficit, the US will impose an additional 50% tariff on Canadian automobiles and steel starting in 2027 (tax-exempt for production in the US). He stated directly: Canada needs the US, not the US needs Canada.

Next, the Canadian government announced on the 25th that it would impose retaliatory tariffs on about $20 billion worth of US goods, while launching an enterprise and worker aid plan totaling about $5.4 billion. The retaliatory tariffs will take effect starting September 8.

However, just last week, the US was originally prepared to reduce the maximum tariff on Canadian automobiles entering the US from 25% to 15%, and steel and aluminum tariffs were also expected to be halved. The two sides had even discussed how to calculate the value of American, Canadian, and Mexican components within a single car.

On August 14, 2026, over 2,200 automobile workers in Brampton, Ontario, Canada halted production for two years, only to wait not for a production resumption date, but news that Stellantis was considering closing and selling the factory.

This factory was originally prepared to invest about 1.32 billion Canadian dollars to produce the next-generation Jeep Compass. According to the plan, the production line would gradually resume three shifts and become an important part of the Canadian automotive industry again.

But the upgrade stopped in early 2025. A few months later, Stellantis announced it would invest $13 billion in the US over the next four years, and the Compass production plan shifted from Canada to the US.

Illinois Belleville factory, which had been idle for years, had the opposite fate.

Although its production resumption time was delayed from 2027 to 2028, Stellantis still increased the upgrade budget from about $600 million to $800 million and arranged a new Jeep model for it.

Tariffs are still being argued on the negotiating table, while automakers have started reallocating next-generation models.

In the past, the main factors deciding where a car is produced were labor, logistics, exchange rates, suppliers, and factory efficiency. Now there is another increasingly heavy variable: how much tax does this car have to pay when crossing the US border?

Move to Mexico six years ago, now moving back again

In 2020, when Toyota moved the Tacoma pickup truck from San Antonio, Texas to Mexico, the business logic was very clear.

Mexico had lower labor costs and was within the North American free trade system. As long as rules of origin were met, parts and complete vehicles could flow at low cost between the US, Canada, and Mexico. The factories in Baja California and Guanajuato thus took over the production tasks for the Tacoma.

Six years later, this pickup truck is starting to move back.

On July 6, 2026, Toyota announced an investment of $3.6 billion in the existing production base in San Antonio to expand the second complete vehicle assembly line, with production planned for 2030 and adding about 2,000 jobs.

According to the plan, part of the Tacoma capacity borne by the Baja California factory will be transferred back to Texas, while the Guanajuato factory will continue to operate.

Toyota did not exit Mexico, only reallocated models and capacity to allow more pickups destined for Americans to be produced in the US.

Honda and GM are also adjusting production plans.

According to Reuters, Honda originally planned to produce the next-generation Civic Hybrid in Mexico starting from November 2027. After Trump proposed imposing 25% tariffs on automobiles from Mexico and Canada, the project shifted to Indiana, expected to start production in 2028 with an annual output of about 210,000 vehicles.

Moving a Civic from Mexico to the US did not reduce labor costs. Labor costs remained unchanged, but costs after crossing the border changed. The cost gap that was originally enough for Mexico to win was filled flat again by an import tax that could reach double digits.

GM's production transfer scope is larger.

The company plans to hand over the Buick Envision imported from China to the US long-term to a Kansas City factory starting from 2028. The same factory will also take over the Chevrolet Equinox currently produced in Mexico, while the Blazer produced in Mexico is prepared to move to Tennessee.

GM revealed that transferring overseas models back to the US and increasing software investment has already resulted in an additional expense of $1 billion to $1.5 billion.

Nissan America Chairman Meunier (Christian Meunier) also admitted that tariffs are accelerating Nissan's production localization, "Tariffs are actually a bit of a benefit for Nissan because it forced us to accelerate production localization."

US manufacturing did not become cheaper because of this, but cross-border production became more expensive.

This migration has not all happened on the assembly line, but it is already happening in automakers' capital budgets and next-generation model roadmaps. Models reallocated today decide the industrial landscape of 2028 or even 2030.

Three production routes to the US begin to detour

Over the past thirty-plus years, Mexico has gradually become the second production hinterland for the US automotive industry.

In 2024, Mexico produced about 4 million light vehicles, of which about 2.8 million were sold to the US. After the 25% nominal tariff on automobiles landed, Mexico's advantage as a base for exporting complete vehicles to the US began to weaken.

Over the past thirty-plus years, Mexico has gradually become the second production hinterland for the US automotive industry.

In 2024, Mexico produced about 4 million light vehicles, of which about 2.8 million were sold to the US. After the 25% nominal tariff on automobiles landed, Mexico's advantage as a base for exporting complete vehicles to the US began to weaken.

In 2025, Mexico's automotive exports to the US decreased by nearly 3% for the first time after several years of continuous growth. During the same period, industry employment also shrank.

Changes come not only from the US raising tariffs on automobiles from Mexico and Canada, but also from the US negotiating new tax rates with other automobile exporting countries.

Car production taxes for Japan, South Korea, and the EU entering the US have dropped to about 15%, while most UK models are about 10%. In contrast, cars produced in Mexico and Canada, although deductions can be made based on their US manufacturing value, still face higher nominal tax rates and more complex origin certification.

The COMPAS factory in Aguascalientes, Mexico has become a microcosm of this change. This factory, jointly operated by Nissan and Mercedes-Benz, stopped production at the end of May this year, and buyers have yet to be determined. Mercedes-Benz transferred subsequent production of the GLB to Hungary, while Nissan ended production of the Infiniti QX50 and QX55.

BYD, Geely, and Vietnam's VinFast entered the final stage of bidding for the COMPAS factory, while Chery and Great Wall had expressed interest previously. For these enterprises, the factory's more realistic value right now is the Mexico and Latin American markets. To enter the US via this route, one still needs to cross two thresholds: rules of origin and connected car restrictions.

Canada faces another kind of pressure.

Data from the Advanced Manufacturing Network under the University of Western Ontario shows that Ford, GM, Honda, Stellantis, and Toyota produced a total of about 2.3 million cars in Canada in 2016, dropping to about 1.2 million by 2025.

Tariffs did not open the contraction of Canada's automotive industry, but further changed model allocation. In the past, a model relying on the US market for scale could be produced in Canada; now, the same car needs to be recalculated for tariffs when crossing the border, and idle factories within the US thus gain greater advantages.

Complete vehicles can be reallocated, but the industry chain is already intertwined.

Ford's engine factory in Windsor, Canada, has long supplied US complete vehicle factories in Kentucky, Michigan, Missouri, and Ohio. The value of cars produced in Canada comes from the US by an average of about 50%, while the US value in assembled cars in Mexico is an average of about 35%.

Although US manufacturing value can be deducted from the taxed portion, the overall cost of cars assembled in Canada will still rise. Once these models are cut back, US factories supplying engines, electronics, and other parts will also lose orders.

As warned repeatedly by Canadian automotive industry insiders, hurting Canadian car production will also hurt Detroit along the supply chain.

Canada also began to exchange market access for production commitments. Automakers maintaining production and investment in Canada can import their US-produced automobiles with tax-free tariffs within a certain quota; once enterprises cut Canadian production, related incentives will also be revoked.

After Stellantis shifted the Compass production plan to the US, Canada reduced its related tax-free import quota by 50% and initiated procedures to pursue its responsibility for failing to fulfill investment commitments. Model migration has thus become not only a capacity allocation within the enterprise, but also a means for two countries to compete for investment and jobs.

The direct export route from China to the US continues to narrow.

In August 2026, Ford confirmed that it would move some Lincoln models for the US market from China to US production starting in 2030. The most watched is the Nautilus, which currently carries a comprehensive tariff rate of 52.5%.

US connected car rules also restrict the use of some Chinese hardware and software in cars sold in the US. After stacking tariffs and technical regulations, "China production, US sales" is becoming increasingly difficult.

This does not mean that transnational automakers are withdrawing from China. What is truly narrowing are the routes of production in China, Mexico, and Canada, and then exporting to the US. Next-generation models and new total assembly capacity on these routes are falling more and more into the US.

One car, broken down into 75%, 82%, and 50%

US President Trump and Canadian Prime Minister Mark Carney (Right) | Source: Reuters

At the negotiating table, a car is no longer just a Civic, Tacoma, or Compass, but three numbers: 75%, 82%, and 50%.

The current United States-Mexico-Canada Agreement (USMCA) requires that cars enjoying preferential treatment typically need about 75% of their value to come from North America.

The new proposal discussed by the US in 2026 prepares to raise this proportion to about 82% and requires at least 50% of the complete vehicle value to be formed directly in the US. Key links such as engines, major electronic components, and software also face higher origin proportion requirements.

Thus, a car that has already rolled off the line in a US factory still has to continue answering: Where does the engine come from, where is the wiring harness produced, and do the battery, software, and seats count under which country?

New rules attempt to force enterprises not only to put total assembly in the US, but also to bring more parts, technology, and procurement into the US.

How much the engine, battery, software, and seats count respectively directly decides how much tariff deduction a car can get when crossing the border.

If new origin requirements are all implemented, Reuters cited internal calculations from two automakers that each large automaker in Detroit could add at least $2 billion in expenses annually.

GM expected tariff-related spending in 2026 could reach $2.5 billion to $3.5 billion, while Ford expected a net impact of about $1 billion.

These costs will not stay in automakers' financial reports.

High-profit pickups and large SUVs might be able to digest price increases, but entry-level models priced at two or three ten thousand dollars do not have the same space. Enterprises might find that whether continuing to bear tariffs or moving to costlier US factories, maintaining original profits is difficult.

The last choice is not necessarily reshoring, but could also be reducing imports, canceling models, or further concentrating the US new car market on high-priced products.

New rules are also changing relationships between automakers.

At the beginning of tariff implementation, Ford, GM, and Stellantis had jointly called for maintaining USMCA. As more strict US domestic standards were discussed, divisions began to appear between automakers.

Ford emphasized that about 80% of its cars sold in the US are produced in US factories and proved its local contribution with manufacturing scale and employment.

GM imports about 400,000 cars from South Korea to the US annually, including Chevrolet Trax, Trailblazer, and Buick Envista and other entry-level SUVs. These models have limited profit margins, and the cost advantage of South Korea manufacturing makes it hard for GM to give up.

GM then turned its attention to Ford's supply chain.

Ford's F-150 pickup uses a lot of aluminum and has always hoped to reduce import aluminum tariffs; Ford's battery project in Michigan also adopted CATL technology. For GM, these can be used to question the "US manufacturing" quality emphasized by Ford.

The two companies are competing not just for market share, but also for who fits Washington's definition of "US Manufacturing" more.

However, when the discussion turned to whether to maintain USMCA, they still stood together because both companies cannot separate from the Mexico and Canada supply chain in the short term.

Total assembly line goes first, suppliers lag half a beat

A car part may be processed in Canada first, sent to the US, then enter Mexico, and finally return to the US for assembly.

Magna International has 59 facilities in the US, 50 in Canada, and 33 in Mexico. This factory network spanning three countries is the result of over thirty years of division of labor in the North American automotive industry.

After tariffs landed, each time a part crosses a border, it must be re-declared for source, value, and final destination. Magna management worries that the originally continuous production process will have one more verification and a cost at every border line.

"The automotive industry needs certainty, stable rhythm, and continuity."

Washington doesn't just want total assembly lines. The US is also demanding automakers to increase the domestic production ratio in links such as engines, transmissions, batteries, electronic components, and software.

French parts supplier Valeo revealed that about 90% of products it produced in Mexico and exported to the US meet USMCA requirements. At the same time, the company is shifting some mold production from China to Mexico or the US to reduce tariff risks.

"Moving away from China," "Entering North America," and "Moving to the US" are three different things.

High value-added, higher automation, or policy-sensitive products are more likely to enter the US; some labor-intensive production may shift to lower-cost Mexico first; parts already embedded in the Mexico and Canada production network are difficult to migrate entirely in the short term.

Complete vehicle plants can distribute new models with one decision, but hundreds of suppliers need to purchase equipment, adjust molds, replace raw materials, and re-pass long quality certification.

Tariffs can create motivation for production in the US, but cannot create workers, suppliers, and low-cost capacity out of thin air.

Therefore, the current US automotive manufacturing "reshoring" mostly manifests as idle factories getting models again, existing factories increasing utilization rates, rather than a sudden appearance of many brand new complete vehicle factories and supplier parks.

Belleville, GM Kansas factory, and Tennessee factory all belong to this category.

New factories are also appearing. Toyota plans to invest $3.6 billion in San Antonio; Mercedes-Benz announced investing another $4 billion in the Alabama factory; Hyundai Motor Group plans to invest $26 billion in the US by 2028, raising US annual output from about 800,000 to 1.2 million vehicles.

But having existing factories digest new models is still the faster choice.

Another change appeared in parts imports.

In the first half of 2026, Mexico exported $41.52 billion worth of auto parts to the US, a year-on-year increase of 1.96%. During the same period, total US imports of auto parts from the world decreased by 0.89%.

Mexico's share in US auto parts imports rose from 43.74% in 2025 to 44.73%, reaching a new high.

This ratio refers to Mexico's share in US imported parts, not its proportion in total US auto parts consumption. It shows that US remaining parts imports are concentrating on Mexico, but cannot alone prove that US domestic parts production is decreasing.

Mexico has factories, skilled workers, logistics networks, and quality certification systems accumulated over thirty-plus years. For automakers, switching from Asian suppliers to Mexican suppliers is faster and cheaper than cultivating a new supplier from scratch in the US.

Before US supply capacity is fully补齐 (filled in), new total assembly capacity still needs delivery from Mexican suppliers.

Three countries, still one factory

BYD already has a factory with an annual capacity of 150,000 vehicles in Rayong, Thailand. This factory started production in July 2024, producing pure electric vehicles and plug-in hybrid vehicles, simultaneously targeting the Thai and other ASEAN markets. The Indonesia factory plans an investment of $1 billion, with a design annual capacity also reaching 150,000 vehicles, with long-term goals also including exports.

The US increasing domestic parts ratios will eventually push some suppliers to move to the US.

Batteries, chips, core software, high-end electronic systems, and structural parts with higher degrees of automation are more likely to layout near US assembly plants. Line harnesses, seats, and general mechanical parts with higher labor cost ratios and lower profit margins are more likely to remain in Mexico.

Canada's advantages in engines, complete vehicles, and some key parts will not disappear immediately.

The US is getting more total assembly and high-value links, Mexico continues to bear large-scale general parts production, and Canada tries to hold onto engine and complete vehicle factories.

The three-day pause on August 18 did not bring an agreement. On August 21, US-Canada negotiations broke down, and the US subsequently imposed a new round of 50% tariffs on some Canadian goods, with automobiles also included. The brief pause did not eliminate uncertainty, but instead made it harder for automakers to continue waiting.

Factory construction takes years; automakers cannot wait for rules to be fully determined and must place bets in advance between tariffs, costs, and political risks.

As of mid-August, the Brampton factory is still looking for a buyer, and Belleville resumption won't wait until 2028. This migration has already been written into automakers' capital budgets and model plans, but hasn't fully appeared on the assembly line yet.

"Automotive Business Review" believes that the next batch of automobiles for the US market will have more complete assembly completed in the US; but engines, harnesses, seats, and electronic components will continue to shuttle between the US, Mexico, and Canada.

In other words, the North American automotive industry has not yet been taken apart, and its total assembly, investment, and discourse power are tilting further towards the US.

Main References:

1. "Trump says US and Canada strike deal, temporarily pauses tariffs", Reuters, August 18, 2026.

2. "US automakers try to avoid Mexico-Canada trade pothole", Reuters, August 18, 2026.

3. "Ford to move production of some Lincoln models from China to US", Reuters, Nora Eckert, August 12, 2026.

4. "Detroit automakers fear North American trade deal revamp could cost them billions", Reuters, August 13, 2026.

5. "Automakers plan billions in US investments but seek clear trade rules", Reuters, David Shepardson, Kalea Hall, April 1, 2026.

6. "Toyota to build $3.6 billion Texas plant, shift some truck production from Mexico", Reuters, July 6, 2026.

6. "Honda to produce next Civic in Indiana, not Mexico, due to US tariffs, sources say", Reuters, Maki Shiraki, March 3, 2025.

8. "GM to move production of Buick SUV from China to US", Reuters, Kalea Hall, David Shepardson, January 22, 2026.

9. "Seeking Mexico foothold, China's BYD and Geely bid to buy car plant", Reuters, Emily Green, February 12, 2026.

10. "Stellantis considering sale of Canada plant, autoworker union says", Reuters, August 14, 2026.

11. "Stellantis to invest $13 billion in the United States", Reuters, October 14, 2025.

12. "The Road Behind Is Not the Road Ahead", Trillium Network for Advanced Manufacturing, 2026.

13. "How one of the largest auto suppliers in the world is preparing for Trump's tariffs", Reuters, Nora Eckert, April 2, 2025.

14. "Auto groups urge Trump to extend trade deal with Mexico, Canada", Reuters, David Shepardson, May 7, 2026.

15. "German automaker Mercedes-Benz to invest $4 billion in Alabama SUV plant", Reuters, David Shepardson, March 31, 2026.