Mexican Production Edges Out U.S. Truck Makers Amid Tariff Pressures

The U.S. heavy-duty truck industry is grappling with the economic fallout of steep tariffs on raw materials and imported components, prompting a strategic shift in manufacturing and sourcing practices. The $50 billion industry now faces 50% tariffs on imported steel, aluminum, and copper derivatives under Section 232 of the Trade Expansion Act. These levies, coupled with duties on non-USMCA-compliant parts, are creating a significant cost burden for manufacturers assembling trucks in the United States. In response, companies are increasingly sourcing components and assembling vehicles in Mexico to take advantage of duty-free benefits under the U.S.-Mexico-Canada Agreement (USMCA) [3].

Under USMCA, heavy trucks must contain at least 64% regional content to qualify for duty-free trade, a requirement set to rise to 70% in 2027. This has provided a structural cost advantage to manufacturers producing in Mexico, where companies like Daimler Truck and Traton have been able to avoid many of the tariffs faced by their U.S. counterparts. For instance, Daimler’s Mexican-built Freightliner Cascadia is priced at approximately $165,000, compared to $195,000 for Paccar’s comparable Kenworth T680, reflecting the cost disparity driven by tariffs [4].

The cost disadvantage for U.S.-based manufacturing is further highlighted by Bernstein analysis, which estimates a 3% premium on trucks assembled in the U.S. over those built in Mexico. Paccar, which sells trucks under the Kenworth and Peterbilt brands, reported $75 million in tariff costs for the third quarter of 2025 and has a 30.4% market share in the first half of the year. In contrast, Daimler reported a first-quarter gross margin of 21.96%, surpassing Paccar’s 18.69%. Paccar’s CEO, Preston Feight, has emphasized the company’s efforts to increase USMCA-certified parts imports to mitigate long-term tariff exposure [4].

Volvo and its subsidiary Mack Trucks, which continue to assemble vehicles in the U.S., have not been immune to the pressures. A spokesperson for Volvo’s North American unit acknowledged that U.S. truck manufacturing is at a disadvantage compared to Mexican production. In response, Volvo increased its planned Mexico plant investment by $300 million to $1 billion in April 2025 to better support U.S. operations [3].

ACT Research forecasts a 11% decline in 2026 production to 226,600 units, attributing this to economic headwinds and weaker carrier profitability in 2025. This forecast adds to the existing pressures from tariffs. The U.S. heavy-duty truck market, currently valued at $51.56 billion, is projected to grow to $71.81 billion by 2030, according to Mordor Intelligence, despite these challenges [4].

The U.S. Commerce Department’s recent Section 232 probe into the national security implications of medium- and heavy-duty truck and parts imports could further complicate the cost dynamics for manufacturers. The probe could lead to new tariffs or exemptions, potentially reshaping the industry’s cost structure and influencing production decisions [4].

Traton, the Volkswagen-owned company operating International Motors for the North American market, has emphasized how the USMCA facilitates duty-free access to the U.S. market for most finished trucks. This structural advantage, particularly for companies using imported steel, aluminum, or components subject to Section 232 duties, positions Mexican-built models as more competitive in the U.S. market [4].

While the U.S. market remains significant, the combination of tariffs and shifting production strategies underscores a broader trend of offshoring to navigate trade barriers. This shift is not only reshaping the competitive landscape but also reflecting the broader economic and policy challenges facing U.S. manufacturers in a globally integrated industry [4].

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[1] title1 (https://www.cryptopolitan.com/trumps-tariffs-hurt-us-truck-industry/)

[2] title2 (https://www.usnews.com/news/top-news/articles/2025-08-26/us-truck-makers-look-for-cover-as-trumps-tariffs-raise-costs)

[3] title3 (https://www.indexbox.io/blog/us-truck-makers-face-tariff-costs-shift-sourcing-to-mexico/)