According to a Reuters report, Section 232 tariffs on imported steel, aluminum, and copper derivatives are raising manufacturing costs for the $50 billion U.S. heavy-duty truck industry, prompting a strategic shift toward sourcing more components from Mexico. Data from the IndexBox platform further illuminates the market dynamics, showing the U.S. heavy-duty truck market was valued at $51.56 billion and is projected to grow to $71.81 billion by 2030.
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Manufacturers producing trucks in the U.S. face a significant cost disadvantage. Bernstein analysis indicates that tariffs on imported components put trucks assembled in the U.S. at a 3% cost premium compared to USMCA-compliant models built in Mexico. This is reflected in the market, where Daimler's Mexican-built Freightliner Cascadia is priced at approximately $165,000, notably lower than the roughly $195,000 for Paccar's comparable Kenworth T680. ACT Research estimates these tariffs add 2% to 4% to per-unit costs.
The USMCA trade pact, which allows duty-free movement of goods meeting specific regional content rules, is central to this shift. Rivals like Daimler Truck and Traton avoid these levies by manufacturing in Mexico, gaining a structural cost advantage. In contrast, companies with a larger U.S. manufacturing footprint, such as Paccar, face higher expenses; the company estimated $75 million in tariff costs for the third quarter alone. Paccar's brands held a 30.4% market share in the first half of 2025, while Daimler reported a higher first-quarter gross margin of 21.96% compared to Paccar's 18.69%.
In response, manufacturers are increasing investments in Mexico. Volvo boosted its planned investment in a Mexican plant by $300 million to a total of $1 billion to support its U.S. operations. Paccar's CEO stated the company is working with suppliers to increase imports of USMCA-certified parts to reduce long-term tariff exposure. The industry also faces broader challenges, with ACT Research forecasting production to dip 11% year-on-year in 2026 to 226,600 units due to economic headwinds.
The cost structure of truck manufacturing underscores the impact of these tariffs, as raw materials, castings, and finished components constitute roughly 85% of the total cost of building a truck. A potential new layer of complexity is a U.S. Commerce Department Section 232 probe begun in April, which could lead to new tariffs or exemptions on imports of medium- and heavy-duty trucks and parts, further reshaping the industry's cost dynamics.
Source: IndexBox Market Intelligence Platform