Oil supply disruptions and USMCA deadline impact auto industry stability

S&P Global Mobility analysts are still working on the May light-vehicle production forecast; final numbers will be available mid-month. It remains impossible to determine guidance for the scope and severity of automaker-level impact. 

As the situation continues to evolve, so do the assumptions with forecast rounds. Our latest assumptions include the possibility of production risk due to lower demand and physical supply chain disruption. With dynamics changing, now we expected that existing global light-vehicle inventory could soften any potential impact of automotive supply chain issues.  

Over the first half of 2026, we have seen evidence of automakers maintaining robust production output levels. Global vehicle inventories rose as automakers boosted stock levels in regions where parts availability continued undisrupted. However, some stocks of petroleum-derived feedstocks and primary aluminum could see supply disruptions by the end of May.  

We continue to assess that production hubs most at risk are Japan, South Korea and ASEAN. Europe and aligned manufacturing in Morocco and South Africa are secondary risks. As noted, the final May 2026 global light-vehicle forecast will be finalized and available in mid-May.

Though the May 2026 forecast will incorporate a longer disruption than earlier presumed, many of our previous expectations carry forward – and the longer the conflict persists, the deeper and longer the impact is likely to be felt.  

The impact of oil and natural gas pricing variables are disruptive owing to their cumulative effect. As commodity price increases take hold across the economy and supply chain, they will increasingly pressure monthly household budgets and create a knock-on effect to lower vehicle sales. Among the key differences between the April and May assumptions is that the situation is seen as having a greater effect on 2027 than previously.  

There remains risk that the situation persists longer than we’ve presumed for this round. This does create risk for further economic harm, lower availability and higher cost of commodities, and reduced manufacturing. As we previously noted, the duration of the war is the major factor affecting the severity of the damage and the effort needed to recover.

Under the USMCA, the three countries must decide by July 1, 2026, whether to extend the agreement for another 16 years (with another review opportunity in 2032). If any of the three countries decline to confirm the agreement, it enters a cycle of annual reviews.  

Those reviews are opportunity to essentially renegotiate through amendments. Given the US efforts to increase tariffs on Canada and Mexico since President Trump took office, it seems highly unlikely the three will agree to extend. Essentially, a renegotiation is presumed. We believe the probability of a renegotiated USMCA remains about 70%.  

Against that backdrop, we see potential for several new elements to be added to the USMCA. Among them could be implementation of US automotive tariffs on USMCA-compliant vehicles of 10% (the 25% on non-compliant vehicles presumably remains); addition of a modest US Value Add (USVA) for Canada- and Mexico-built vehicles bound for the US; adjustment to the treatment of capital and currency rates; and a key mode designed to control or limit China share/value increase.  

We also see potential for changes to the agreement to include increase in the labor value content (LVC) rate to US$20+ with a forward inflation adjustment. The regional value add (RVA) could be increased above 75% – though that could be limited by current industry ecosystems. We also see potential for the redefinition and expansion of core parts which comply with the RVA.