The US heavy-duty truck industry, which is worth around USD 50 billion, is facing a combination of tariffs that give an advantage to cross-border competitors. The Trump administration’s Section 232 tariffs add a 50 per cent hefty duty on imported metals, including steel, aluminium and copper derivatives, and extra charges on non-USMCA components, driving up costs for US truckmakers like Paccar, headquartered in Bellevue, Washington.
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Paccar estimated that tariff-related charges are going to be USD 75 million in Q3 2025.
Mexico gains tariff advantage
Rival companies like Daimler Truck and Traton sidestep much of this pain by producing in Mexico, where compliance with the US-Mexico-Canada Agreement (USMCA) provides duty-free movement. As Volvo’s North American unit acknowledged, “Trucks built in the US are actually disadvantaged today compared to trucks built in Mexico.” The Swedish company has subsequently increased its investment in a plant in Mexico to USD 1 billion, a move that is representative of the larger trend to hedge against tariffs and location diversification.
Analysts: tariffs are likely to backfire on US makers
Industry analysts stress the fallout of this policy. “Companies with a higher manufacturing footprint in the US than in Mexico are at a relative cost disadvantage, and this is the complete antithesis of what the Trump administration wants,” said Chad Dillard, senior analyst, Bernstein.
Trucks assembled in the US now bear an estimated 3 per cent cost premium versus USMCA-compliant Mexican models, which ultimately defeats the administration's original "America First" intent.
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New tariff wave expands the scope
Six months into Trump’s 2025 tariffs, things have intensified further. In August, over 400 more aluminium and steel product categories, from auto parts to railcars, refrigerators, and even wind turbines, found themselves subject to tariffs now at 50 per cent. The US Department of Commerce has justified the tariff expansion on the grounds that it will protect domestic producers. But manufacturers note it further compressed margins for an industry where raw materials already account for 85 per cent of truck-building costs.
Volkswagen-owned Traton said, “This can offer a structural cost advantage versus US production in cases where US plants rely on imported steel, aluminium, or components subject to Section 232 or other additional tariffs.” Daimler has echoed this by highlighting its two fully compliant Mexican plants producing the Freightliner Cascadia and M2.
A shrinking production base?
The stakes are high. ACT Research forecasts an 11 per cent production decline in 2026, worsened by a weak freight demand on top of cost pressures. Additionally, the US Commerce Department has initiated a Section 232 investigation into imported trucks and parts, which could either change the exemptions or create entirely new tariffs.
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