Canada and Mexico have won a trade dispute against the U.S. over duty free vehicles that are shipped across regional borders.
The decision was included in a final report by a dispute-resolution panel set up under the 2020 U.S.-Mexico-Canada Agreement. The ruling will provide automakers with more incentives to make vehicles in their home country.
U.S. Trade Representative Katherine Tai said in a written statement that the ruling is “disappointing” and could lead to fewer American jobs.
Canada had argued that the trade agreement stipulates that more regionally produced automotive parts should count toward more duty-free shipping than the U.S. wants to allow.
Motor vehicles are the top manufactured product traded between Canada, the U.S. and Mexico.
The U.S. had argued in favour of a strict method to tally the origin of automotive parts, including engines, in the overall calculation of a vehicle’s content.
That interpretation would have made it more difficult for manufacturing plants in Mexico and Canada to meet the duty-free threshold of 75% regional content.
The U.S. Trade Representative’s office said it is considering appealing the trade panel’s ruling.
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