Tariff Relief on Heavy Duty Trucks Will Boost American Companies and Jobs
October 2026
HEAVY-DUTY TRUCK TARIFF RELIEF • OCTOBER 2026
Tariff Relief on Heavy Duty Trucks Will Boost American Companies and Jobs
October 2026
HEAVY-DUTY TRUCK TARIFF RELIEF • OCTOBER 2026
Tariff Relief on Heavy Duty Trucks Will Boost American Companies and Jobs
October 2026
EXECUTIVE SUMMARY The U.S. heavy-duty truck (Class 8) market is a critical industrial sector encompassing four principal original equipment manufacturers (OEMs): Daimler Truck North America, International (formerly Navistar), PACCAR, and Volvo Group North America. These firms compete in a highly concentrated market where modest cost differentials— as small as one to two percent of cost of goods sold (COGS)—can produce meaningful shifts in price competitiveness, margin, market share, and total sector output. The Supreme Court's February 2026 decision in Learning Resources, Inc. v. Trump, which invalidated the broad tariff authority exercised under the International Emergency Economic Powers Act (IEEPA), and the subsequent wave of tariffs imposed under other authorities—including new Section 232 duties on medium- and heavy-duty trucks and parts, and a threatened escalation of tariffs on Canadian vehicles and parts to 50 percent effective January 1, 2027— present a timely opportunity to rationalize U.S. trade policy in the heavy-duty truck sector. Rather than filling the IEEPA vacuum with a new layer of restrictive measures, this paper argues that the more economically sound path is to extend broad tariff relief to all USMCA-compliant goods, using existing trade architecture to reward North American integration without imposing new barriers. This paper examines the supply chain profiles of each OEM, models tariff cost exposure across four policy scenarios, and estimates the employment and GDP consequences of each option, drawing on the peer-reviewed academic literature to ground those estimates. The central finding is that shielding USMCA-compliant vehicles from both Section 232 and Section 301 tariffs would eliminate the principal competitive distortions currently afflicting the sector, support an estimated 15,000 to 35,000 additional North American jobs in the medium term, and generate a modest positive GDP contribution. By contrast, layering additional broad-based tariffs on top of the Section 232 truck-and-parts duties now in effect would raise industry-wide costs and are estimated to produce near-zero to mildly negative net employment and GDP effects, consistent with the academic literature on the input cost channel of tariff policy.
I. INTRODUCTION AND POLICY CONTEXT The United States heavy-duty truck sector is a foundational element of both commercial infrastructure and national defense logistics. Class 8 vehicles (semi-trucks, heavy-haul equipment, and specialized military-adjacent platforms) underpin freight networks, supply chains, and emergency response systems, including those in the armed services. The sector supports approximately 85,000 direct OEM manufacturing jobs and an estimated 1.5 million total direct, indirect, and induced jobs across North America, with annual direct revenues exceeding $45 billion and a total supply chain footprint approaching $200 billion in gross output. The four major OEMs (Daimler Truck North America [Freightliner, Western Star], International [International and IC Bus], PACCAR [Kenworth, Peterbilt], and Volvo Group North America [Volvo, Mack]) maintain extensive U.S. and North American manufacturing facilities and together account for essentially the entire domestic market. Annual U.S. Class 8 sales typically range from roughly 200,000 to 300,000 units. Market share is concentrated among the four firms, with Daimler Truck generally holding the largest position (estimated at approximately 35–40 percent of the market), followed by PACCAR (approximately 25–30 percent), and Volvo Group and International each holding midteens to roughly 20 percent shares. These figures fluctuate year to year, but the four-firm structure is stable. Heavy trucks are also central to the broader freight economy: trucks move approximately 70 percent of U.S. domestic freight by weight, and Class 8 vehicles serve as dual-use logistics assets directly relevant to defense mobilization. In a market this large but also this concentrated, a relative cost advantage of even 3–5 percent can materially shift market share, affecting investment decisions, employment, and the pace of innovation across the sector.
HEAVY-DUTY TRUCK TARIFF RELIEF • OCTOBER 2026
Tariff Relief on Heavy Duty Trucks Will Boost American Companies and Jobs
October 2026
IEEPA Invalidation and Subsequent Policy Reset Opportunity In Learning Resources, Inc. v. Trump, decided in February 2026, the Supreme Court held that the executive branch's use of the International Emergency Economic Powers Act to impose broad, unilateral tariffs exceeded the statute's scope and was constitutionally infirm as an impermissible delegation of congressional taxing authority. The decision vacated the IEEPA tariff framework, removing emergency duties that had imposed significant additional costs on goods from China and other designated countries while exempting USMCA-compliant vehicles and components. The IEEPA tariffs had produced a complex and internally inconsistent cost environment for heavy-duty truck manufacturers. Their removal has provided a policy reset and creates an opportunity to ask whether the remaining tariff architecture—principally the Section 232 steel and aluminum tariffs and the newer Section 232 tariffs on medium- and heavy-duty vehicles and parts that took effect on November 1, 2025, together with Section 301 measures and the scheduled January 1, 2027 escalation of tariffs on Canadian automotive goods—serves the objectives it was intended to achieve, or whether it now produces distortions that harm the very domestic manufacturers it was designed to protect. Furthermore, the rapid succession and uncertain future of these overlapping measures has reduced investment visibility and caused some customers to delay orders.
Supply Chain Realignment Since USMCA Ratification Since USMCA entered into force in July 2020, the major heavy-duty truck manufacturers have moved meaningful portions of their supply chains and production toward North America, in direct response to the agreement's incentive structure. USMCA tightened the automotive rules of origin governing heavy trucks: at least 64 percent of a heavy truck's value must now originate in North America—through components such as engines and transmissions, raw materials such as steel, and assembly labor—with that threshold scheduled to rise to 70 percent in 2027. The agreement also introduced first-of-their-kind labor value content requirements and a North American steel and aluminum procurement mandate. Together, these provisions created a strong commercial incentive for OEMs and their suppliers to localize content within the bloc. Unlike car and light-truck production, the medium- and heavy-duty truck industry does not have large economies of scale with highly automated assembly lines producing millions of vehicles annually. Heavy-duty trucks are closer to a built-to-order production structure with a highly specialized supplier base. Consequently, this sector is less able to adapt quickly to certain abrupt regulatory changes or aggressive compliance timelines. The longer phase-in period associated with the USMCA provided sufficient time for the industry to meet the new requirements in ways that the recent tariff changes have not. The resulting realignment from USMCA has been concrete and substantial. Volvo Group, whose U.S.-built trucks it describes as disadvantaged relative to USMCA-compliant vehicles assembled in Mexico, increased its planned Mexican plant investment by $300 million to a total of approximately $1 billion in 2024, explicitly to support its U.S. operations and North American content position. Daimler Truck North America has continued to deepen its integrated U.S.-Mexico footprint—anchored by its Saltillo and Santiago Tianguistenco assembly plants and a surrounding supplier base—while also committing approximately $285 million in 2024 to modernize its Detroit, Michigan powertrain manufacturing plant. International (Navistar), under TRATON ownership, has reinforced a North American sourcing posture spanning its San Antonio, Texas and Escobedo, Mexico assembly plants and its Huntsville, Alabama powertrain facility. The San Antonio, Texas assembly facility, which began production in 2022, was the first new truck assembly plant in the U.S. in three decades with an investment exceeding $250 million, while investment in the Huntsville, Alabama facility exceeded $200 million. More broadly, the supplier community has responded to USMCA and to declining reliance on Chinese-origin inputs by expanding North American capacity, part of a wider nearshoring trend in which U.S. imports from China have fallen while North American manufacturing trade has grown. This accumulated investment in USMCA-compliant production is precisely the behavior that sound trade policy should reward but it is precisely what the current tariff regime inadvertently penalizes. The current post-IEEPA tariff environment, with the Section 232 steel, aluminum, and now truck-and-parts tariffs all applying, and further escalation scheduled against Canadian automotive goods in 2027, disproportionately burdens HEAVY-DUTY TRUCK TARIFF RELIEF • OCTOBER 2026
Tariff Relief on Heavy Duty Trucks Will Boost American Companies and Jobs
October 2026
OEMs that have invested most heavily in USMCA-compliant North American production—exactly the wrong signal. Industry analysts have estimated that tariffs on imported components place U.S.-assembled trucks at roughly a 3 percent cost premium relative to USMCA-compliant models built in Mexico. A USMCA exemption framework offers a more coherent, legally durable, and employment-positive alternative.
Recent Tariff Escalation: The Section 232 Truck Measures and the January 2027 Canada Action Two developments since USMCA ratification have sharply changed the tariff landscape for the heavy-duty truck sector and are central to the analysis that follows. First, on October 17, 2025, the administration issued a Section 232 proclamation imposing a 25 percent tariff on imports of medium- and heavy-duty vehicles and their parts—including engines, transmissions, tires, and chassis components—effective November 1, 2025, with a 10 percent tariff on buses. Consistent with the earlier automotive measures, vehicles qualifying for preferential treatment under USMCA have the tariff applied only to their non-U.S. content, and USMCA-compliant parts remain outside the tariff until the Department of Commerce establishes a process to apply duties to their non-U.S. content. The proclamation also created an import-adjustment offset for domestic assembly—equal to 3.75 percent of the value of U.S.-assembled vehicles (reflecting a 25 percent tariff on parts representing roughly 15 percent of vehicle value)—to give manufacturers time to reshore their parts supply. Second, and more consequentially for the competitive balance analyzed in this paper, on January 1, 2027 the administration is scheduled to raise the tariff on Canadian automobiles, trucks, automotive parts, and steel from 25 to 50 percent—and, critically, to extend that duty to USMCA-compliant automotive parts, ending the carve-out that has to date kept qualifying North American parts tariff-free. This is a material break from the logic of every prior measure. Until now, USMCA compliance has functioned as a shield: qualifying vehicles and parts were either exempt or tariffed only on their non-U.S. content. The January 2027 action, as announced, would for the first time impose tariffs on automotive parts that are fully USMCA-compliant when they originate in Canada—penalizing precisely the North American integration that USMCA was designed to reward. The heavy-duty truck sector is directly exposed to this shift. Cross-border component flows between the United States and Canada are woven through every OEM's supply chain, and PACCAR in particular operates a Kenworth assembly plant in Ste-Thérèse, Quebec that both draws U.S. content into Canada and ships Canadian-built vehicles and components south. Once USMCA-compliant Canadian parts lose their exemption, firms with Canadian sourcing or assembly face a 50 percent duty on flows that were previously duty-free, while the Section 232 truck-and-parts tariffs simultaneously burden non-U.S. content across the board. Rather than restoring competitive neutrality, this accumulation of overlapping measures deepens the very distortion the paper identifies: it raises costs unevenly across the four OEMs according to the geography of their supply chains, and it does so in a way that no longer even spares USMCA-compliant production. The case for a coherent, USMCA-anchored exemption framework is correspondingly stronger.
Policy Framework: Rewarding USMCA Compliance Over Erecting New Barriers This analysis is organized around three principles:
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Competitive Neutrality Through Relief, Not Restriction: Distortions in the current tariff environment should be corrected primarily by removing tariffs on USMCA-compliant production, not by layering on new tariffs that both raise costs across the industry and further penalize USMCA compliance. Proportionality and Precision: Any residual tariff measures should be narrowly targeted at genuine national security concerns and calibrated to avoid collateral damage to efficient North American producers. Market Integrity and Employment: In a competitive but also highly concentrated sector, policy-induced cost asymmetries distort investment and suppress the employment and growth that competitive, open markets generate. HEAVY-DUTY TRUCK TARIFF RELIEF • OCTOBER 2026
Tariff Relief on Heavy Duty Trucks Will Boost American Companies and Jobs
October 2026
II. OEM SUPPLY CHAIN AND MANUFACTURING PROFILES The four major OEMs present materially different supply chain architectures, which translate into different tariff cost exposures. The following profiles draw from publicly available regulatory filings, industry analyst reports, and USMCA certification data. To frame the cost analysis, it is useful to understand the typical structure of a heavy-duty truck's production cost. A representative Class 8 truck—with a production cost in the range of $125,000 to $200,000—derives approximately 60 to 80 percent of that cost from components and parts (steel, electronics, powertrain elements, castings, and wiring), roughly 20 to 30 percent from assembly and labor, and the remainder from overhead. Because components dominate the cost base, the geographic origin of those components—and the tariff treatment that origin attracts—is the single most important determinant of an OEM's relative cost position. Non-North American content varies materially across the four OEMs: USMCA-centric firms carry roughly 10 to 25 percent non-North American content, while PACCAR's reliance on select Chinese-origin inputs (electronics, castings, certain powertrain accessories) is at the higher end of that range.
Daimler Truck North America (Freightliner / Western Star) Daimler Truck North America (DTNA) operates primary assembly facilities in Mt. Holly, North Carolina and Santiago Tianguistenco, Mexico, with the Mexican plant now accounting for the majority of DTNA's North American assembly—an estimated 60 percent, versus roughly 40 percent in the United States. DTNA's supply chain is predominantly North American in origin; approximately 75–80 percent of component value is sourced from U.S. and Canadian suppliers, with Mexican-assembled vehicles qualifying for USMCA treatment. Chinese-origin components represent a low share of DTNA's cost base—estimated at roughly 5 percent of COGS. DTNA stands to benefit most directly from a broad USMCA exemption, as the bulk of its cost exposure stems from Section 232 tariffs on crossborder North American steel flows rather than Chinese-origin component duties.
International (formerly Navistar) International assembles trucks at facilities in San Antonio, Texas and Escobedo, Mexico. International's assembly is majority-Mexican—an estimated 60 percent of output, versus roughly 40 percent in the United States. Following its 2021 acquisition by TRATON Group (Volkswagen), International has maintained a primarily North American sourcing posture. Its Mexican operations are structured to comply with USMCA regional value content requirements. Chinese-origin component exposure is low—estimated in the range of under 5 to 8 percent of COGS; International's TRATON-era North American localization and the USMCA regional-value-content requirements its Mexican assembly must satisfy both point to the lower end of that band. Like DTNA, International's residual tariff burden under the current regime is driven primarily by Section 232 costs on cross-border North American material flows that are nevertheless USMCA-compliant.
PACCAR (Kenworth / Peterbilt) PACCAR's assembly operations are concentrated in the United States—an estimated 90 percent of output—principally Renton, Washington (Kenworth); Denton, Texas (Peterbilt); and Ste-Thérèse, Quebec (Kenworth Canada), with only about 10 percent of assembly in Mexico. PACCAR has historically sourced a higher proportion of components from Chinese suppliers, particularly in electrical systems, lighting assemblies, and powertrain accessories. Chinese-origin component exposure is high—estimated at 18 to 22 percent of COGS, materially higher than its peers. A USMCA exemption would provide PACCAR comparatively less relief, leaving its legacy Section 301 exposure on Chineseorigin goods in place and creating a market-consistent incentive to shift sourcing toward USMCA-qualifying North American suppliers. HEAVY-DUTY TRUCK TARIFF RELIEF • OCTOBER 2026
Tariff Relief on Heavy Duty Trucks Will Boost American Companies and Jobs
October 2026
Volvo Group North America (Volvo / Mack) Volvo Group North America assembles all of its North American trucks in the United States—an estimated 100 percent of assembly—at New River Valley, Virginia (Volvo) and Macungie, Pennsylvania (Mack), with no Mexican assembly footprint, though it still draws on moderate cross-border component flows. Chinese-origin component exposure is moderate—estimated at roughly 10 percent of COGS. A USMCA exemption would provide meaningful relief on Section 232 costs while leaving Volvo with a residual incentive to continue migrating non-USMCA component sourcing toward North American alternatives. Table 1 summarizes these supply chain profiles in comparative form. Table 1: OEM Supply Chain and Manufacturing Profiles (Estimated) U.S. Assembly (%)
Mexico Assembly (%) [USMCA]
U.S./Canada Components (%)
Chinese-Origin Components (%)
Other Foreign (%)
Daimler Truck NA
~40%
~60%
~80%
Low (~5%)
~15%
International (Navistar)
~40%
~60%
~75%
Low (<5–8%)
~17%
PACCAR
~90%
~10%
~60%
High (18–22%)
~20%
Volvo Group NA
~100%
0%
~70%
Moderate (~10%)
~20%
OEM
Source: Publicly available OEM filings, industry analyst estimates, and USMCA certification data. Figures are approximations for analytical purposes. OEMs do not publicly disclose the Chinese-origin share of their components; the figures in the Chinese-origin column are analyst estimates expressed as qualitative bands (Low / Moderate / High) with indicative ranges, and the relative ordering across firms—not any single point value—is what drives the analysis.
III. TARIFF COST EXPOSURE: A FOUR-SCENARIO ANALYSIS To assess the competitive effects of alternative tariff regimes, this section models total tariff cost exposure for each OEM under four scenarios: (A) the prior IEEPA regime, (B) the current post-IEEPA environment, (C) a universal USMCA exemption from Section 232 and Section 301 tariffs (the recommended approach), and (D) a new Section 301 tariff at 25 percent on non-USMCA inputs (an alternative explored for analytical comparison). Cost impacts are expressed as a percentage increment to COGS. It is also helpful to express the results as a relative cost index, normalized so that a competitively neutral firm sits at 100. On this basis, the scenarios produce strikingly different competitive orderings. Under the pre-IEEPA regime (Scenario A), PACCAR sat at a disadvantage (index roughly 105–108) while the USMCA-centric firms clustered near neutral (roughly 98–102). Under the current post-IEEPA environment (Scenario B), the ordering inverts: PACCAR moves to a structural advantage (roughly 97–99) while USMCA-compliant firms are disadvantaged by the continuing Section 232 burden (roughly 103–106). A calibrated policy—whether the preferred USMCA exemption (Scenario C) or a new Section 301 tariff (Scenario D)—would bring all four firms back toward convergence near 100–102, restoring competitive neutrality. The distinction between the two corrective paths lies not in whether they restore neutrality, but in how: Scenario C does so by removing costs from the compliant firms, while Scenario D does so by adding costs to the exposed firms, with materially different employment and GDP consequences, as Section VI shows.
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Tariff Relief on Heavy Duty Trucks Will Boost American Companies and Jobs
October 2026
Scenario A: IEEPA Tariff Regime (Taken as Historical Baseline) Under the IEEPA executive orders—the historical baseline that predates both the November 2025 Section 232 truck tariffs and the January 2027 Canada escalation—elevated tariffs (approximately 30 percent on most Chinese goods following the U.S.-China trade truce) were applied to Chinese-origin components without a USMCA exemption for components; only finished USMCA-qualifying vehicles were partly protected. For PACCAR, with its high Chineseorigin component exposure, this translated into an estimated 3.5 to 4.5 percent COGS increment. For Daimler and International, the net impact was lower at approximately 1.0 to 1.8 percent of COGS. Section 232 steel and aluminum tariffs added a further burden on cross-border North American material flows for all OEMs.
Scenario B: Post-IEEPA Invalidation (Current Environment) With IEEPA tariffs vacated following Learning Resources, the Chinese-origin component burden has been substantially reduced for all OEMs but most dramatically for PACCAR, whose estimated net tariff exposure falls from 3.5–4.5 percent to approximately 1.2–1.8 percent of COGS. Critically, however, the Section 232 regime has since expanded: the steel and aluminum tariffs continue to apply, and the November 2025 Section 232 action added 25 percent tariffs on medium- and heavy-duty vehicles and their non-U.S. parts content. Because these measures fall on cross-border North American flows and non-U.S. content rather than on Chinese-origin components specifically, they disproportionately burden OEMs with USMCA-compliant cross-border supply chains. The result is a counterintuitive inversion: firms that have invested most heavily in North American production networks face relatively higher tariff costs than a firm with greater Chinese supply chain exposure. The scheduled January 1, 2027 escalation of Canadian automotive tariffs to 50 percent—extended for the first time to USMCA-compliant parts—would sharply intensify this inversion for any OEM with Canadian sourcing or assembly, most notably PACCAR's Quebec operations.
Scenario C: Universal USMCA Exemption (Preferred Approach) Under this scenario, all USMCA-compliant vehicles and components would be exempted from both Section 232 and Section 301 tariffs. This approach uses existing, internationally negotiated trade architecture rather than creating new unilateral measures. The USMCA already defines qualifying North American content; an exemption based on USMCA compliance is rule-based, predictable, and WTO-consistent. DTNA and International (with predominantly USMCAqualifying production) would see near-complete tariff relief. PACCAR retains a residual burden under existing Section 301 measures on Chinese goods, creating a durable, market-consistent incentive for sourcing migration toward North American suppliers without requiring new legislative action, consistent with the goals of USMCA.
Scenario D: Section 301 Tariff at 25 Percent on Non-USMCA Inputs (Suboptimal Alternative) A new Section 301 tariff of 25 percent on non-USMCA-origin components would restore approximate competitive neutrality by increasing costs for OEMs with higher Chinese-origin exposure. However, this approach adds new tariff costs for all OEMs rather than removing existing ones, raises industry-wide production costs, invites retaliatory trade measures, and faces heightened legal scrutiny following Learning Resources. As Section VI demonstrates, the employment and GDP effects of this approach are materially suboptimal to Scenario C.
HEAVY-DUTY TRUCK TARIFF RELIEF • OCTOBER 2026
Tariff Relief on Heavy Duty Trucks Will Boost American Companies and Jobs
October 2026
Table 2: Estimated Tariff Cost Exposure by OEM and Scenario (% of COGS) OEM
Scenario A: IEEPA (Baseline)
Scenario B: PostIEEPA (Current)
Scenario C: USMCA Universal Exemption (Proposed)
Scenario D: S.301 @ 25% on Non-USMCA (Alternative)
Preferred Path
Daimler Truck NA
+1.0–1.5%
+0.3–0.6%
~0% (USMCA exempt)
+1.1–1.6%
Scenario C
International (Navistar)
+1.2–1.8%
+0.4–0.7%
~0% (USMCA exempt)
+1.2–1.7%
Scenario C
PACCAR
+3.5–4.5%
+1.2–1.8%
+2.5–3.5% (non-USMCA exposure remains)
+3.5–4.8%
Scenario C + adjustment path
Volvo Group NA
+1.8–2.5%
+0.8–1.2%
+0.5–1.0% (partial nonUSMCA exposure)
+2.0–2.8%
Scenario C
Figures represent estimated tariff cost as % of COGS. Scenario C reflects USMCA-compliant inputs/vehicles fully exempted from Section 232 and Section 301 tariffs; non-USMCA inputs remain subject to existing measures. See Appendix A for methodology.
Note: COGS figures are illustrative estimates. Scenario C assumes full USMCA-compliance exemption from S.232 and legacy S.301; PACCAR's residual exposure reflects Chinese-origin components not eligible for USMCA treatment under existing measures.
The January 2027 Canada Escalation as a Fifth, Distortion-Deepening Scenario The four scenarios above were framed around the choice between the current post-IEEPA environment and corrective measures. The scheduled January 1, 2027 Canada action introduces a distinct and troubling dynamic that cuts against the paper's central objective. By raising the tariff on Canadian automobiles, trucks, and automotive parts to 50 percent and—for the first time—extending it to USMCA-compliant parts, the action removes the one feature that had preserved a measure of coherence in the tariff structure: the USMCA compliance shield. Where prior measures at least spared qualifying North American content, the 2027 action penalizes it directly. The incidence of this change is highly uneven across the four OEMs, tracking the geography of their Canadian exposure. PACCAR, which operates Kenworth assembly in Ste-Thérèse, Quebec and maintains substantial crossborder component flows, is by far the most exposed; the others, with lighter Canadian footprints, face smaller but still material increases. Table 3 summarizes the differential impact. Critically, this action worsens rather than corrects the competitive inversion documented in this paper: it adds cost unevenly, falls hardest on an OEM's USMCA-compliant Canadian production, and further rewards supply chains that avoid North America altogether. It is, in effect, the mirror image of the USMCA exemption this paper recommends. Table 3: Differential Impact of the January 1, 2027 Canada Tariff Escalation by OEM (Estimated)
OEM
Canadian Sourcing / Assembly Exposure
Canada Tariff Treatment Before 2027 (USMCA parts exempt)
Canada Tariff Treatment After Jan 1, 2027 (50%, USMCA parts included)
Estimated Incremental COGS Effect from 2027 Action
Daimler Truck NA
Low-moderate; limited direct Canadian component content
USMCA-compliant parts duty-free
50% duty now reaches USMCA-compliant Canadian parts
+0.1–0.4% COGS
International (Navistar)
Low; primarily U.S.Mexico axis
USMCA-compliant parts duty-free
50% duty on any Canadian-origin parts, incl. USMCA-compliant
+0.1–0.3% COGS
HEAVY-DUTY TRUCK TARIFF RELIEF • OCTOBER 2026
Tariff Relief on Heavy Duty Trucks Will Boost American Companies and Jobs
October 2026
PACCAR
High; Kenworth assembly in Ste-Thérèse, Quebec plus cross-border flows
USMCA-compliant parts and cross-border flows duty-free
50% duty on Canadian vehicles, parts, and previously exempt USMCA content
+0.8–1.8% COGS
Volvo Group NA
Low-moderate; primarily U.S. assembly
USMCA-compliant parts duty-free
50% duty reaches Canadian-origin USMCAcompliant parts
+0.2–0.5% COGS
Note: Incremental COGS effects are illustrative estimates of the additional burden from the 2027 Canada action alone, layered on top of existing Section 232 and Section 301 measures. Ranges reflect uncertainty in Canadian content shares and pass-through. Subsequent tables retain their original numbering.
IV. COMPETITIVE DYNAMICS AND MARKET DISTORTION RISKS The U.S. Class 8 truck market is highly concentrated. The four OEMs analyzed in this paper account for approximately 95 percent of domestic sales, and annual movements in market share are typically measured in single-digit percentage points. In this environment, cost differentials of 1–2 percent of COGS can translate into meaningful pricing pressure, margin compression, or competitive displacement over a multi-year business cycle. Furthermore, because the four OEMs have significantly different supply chains with varying amounts of U.S. assembling capacity, various tariffs have had very different effects on suppliers and the OEMs themselves.
The Current Inversion and Its Consequences The post-IEEPA, post-Learning Resources environment has produced a structural cost inversion. Firms that have made the heaviest investments in USMCA-compliant North American production now face relatively higher tariff exposure than a firm with greater Chinese supply chain dependence, because Section 232 tariffs penalize cross-border North American trade of goods like steel while no equivalent measure now burdens Chinese-origin components. This inversion is compounded by the geography of final assembly. Daimler Truck and International assemble the majority of their North American trucks in Mexico—an estimated 60 percent of output each—while PACCAR assembles roughly 90 percent of its trucks in the United States and Volvo assembles essentially all of its North American trucks domestically. Because the Section 232 vehicle and parts tariffs fall on non-U.S. content, the two most Mexico-reliant assemblers are also the most exposed to those duties and to the scheduled January 2027 escalation on Canadian automotive goods, even though their production is the most deeply integrated into the North American bloc. This is the opposite of the incentive a USMCA-based policy should create, and it mirrors the market's own reading of the tariff announcements, which lifted the share prices of the U.S.-centric assemblers while weighing on the Mexico-centric ones. Long-term supplier contracts and component design cycles in the truck industry typically span five to seven years. If the current cost environment persists, OEMs will rationally adjust future sourcing decisions accordingly, gradually eroding the North American supplier base that USMCA was supposed to build.
Fleet Purchasing Sensitivity National fleet operators, which account for approximately 40 percent of Class 8 purchases, employ sophisticated procurement models in which vehicle acquisition price is a primary variable. A persistent tariff-induced cost advantage of 1.5–2.0 percent, translated into equivalent pricing, would be sufficient to tip competitive procurement decisions in a significant share of fleet replacement cycles. A USMCA exemption that reduces production costs for the USMCAcompliant OEMs would, over time, be reflected in more competitive vehicle pricing—a direct benefit to fleet operators and the freight economy.
HEAVY-DUTY TRUCK TARIFF RELIEF • OCTOBER 2026
Tariff Relief on Heavy Duty Trucks Will Boost American Companies and Jobs
October 2026
V. NATIONAL SECURITY AND SUPPLY CHAIN RESILIENCE CONSIDERATIONS The heavy-duty truck sector carries direct national security implications. Class 8 heavy trucks are dual-use assets with direct defense logistics applications. Supply chain disruption in the commercial truck sector translates directly into constraints on defense readiness and mobilization capacity.
The Case for USMCA-Aligned Security Policy The national security argument supports a USMCA-centered exemption framework more than it supports new broad tariffs. The USMCA partners, Canada and Mexico, are treaty allies and physical neighbors whose industrial capacity is integrated into U.S. defense and emergency logistics networks. A supply chain rooted in USMCA-compliant North American production draws on allied-country manufacturing, is not subject to unilateral export controls by adversarial governments, and benefits from the legal certainty and dispute resolution mechanisms of the trade agreement. A blanket USMCA exemption from Section 232 and Section 301 tariffs therefore serves national security objectives by concentrating tariff exposure precisely where it belongs—on non-USMCA inputs, particularly those sourced from countries of concern—while freeing allied-country supply chains from unnecessary friction and costs. This is a more precise posture than maintaining indiscriminate tariffs that penalize USMCA-compliant production alongside genuinely risky offshore sourcing from countries like China.
Targeted Measures for Genuine Vulnerabilities Where specific component categories present genuine supply chain security vulnerabilities (semiconductors, certain electrical systems, communications hardware) targeted measures, applied on a product-specific basis with appropriate national security findings, are the appropriate instrument. They are preferable, both legally and economically, to sweeping tariff regimes applied across entire sectors without product-level differentiation.
VI. EMPLOYMENT AND GDP EFFECTS: ACADEMIC DERIVATION AND ESTIMATES Analytical Framework and Academic Grounding The employment and GDP estimates presented in this section are derived by applying empirically estimated elasticities from the peer-reviewed academic literature to the economic footprint of the North American heavy-duty truck sector. The sector's estimated economic footprint comprises approximately 85,000 direct OEM manufacturing jobs in the United States, Canada, and Mexico; an estimated 500,000 to 700,000 additional Tier 1–3 supplier jobs directly dependent on OEM output; and a total direct, indirect, and induced employment footprint of approximately 1.5 million North American workers. Sector gross output is estimated at approximately $45 billion (direct OEM manufacturing) and $175–200 billion inclusive of the full supply chain. Three bodies of academic research anchor the quantitative estimates:
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Furceri, Hannan, Ostry & Rose (2021), published in the World Bank Economic Review, establishes that a 3.6 percentage-point increase in tariff rates is associated with approximately a 0.4 percent decline in real GDP over a five-year horizon for advanced economies, implying a GDP elasticity of roughly −0.11 percent per percentage-point of net tariff increase. This elasticity is applied to the truck sector's supply chain gross output to estimate GDP effects across scenarios. Flaaen & Pierce (2024), published in the Review of Economics and Statistics, finds that U.S. manufacturing industries more exposed to tariff increases experience net employment declines, because HEAVY-DUTY TRUCK TARIFF RELIEF • OCTOBER 2026
Tariff Relief on Heavy Duty Trucks Will Boost American Companies and Jobs
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the negative effect of higher input costs more than offsets the positive effect of domestic market protection. Their results imply that a one percentage-point increase in effective input tariff rates reduces employment in affected manufacturing industries by approximately 0.3 to 0.5 percent. This finding is applied to the employment effects of Scenarios B and D, where input cost burdens are the dominant channel. Caliendo & Parro (2015), published in the Review of Economic Studies, quantifies the employment and welfare effects of NAFTA's tariff reductions using a Ricardian model with sectoral linkages and intermediate goods trade. Their finding that NAFTA liberalization produced welfare gains and trade expansion — concentrated significantly in the motor vehicles sector, which accounts for a disproportionate share of U.S.-Mexico-Canada intra-bloc trade—provides the benchmark for estimating the positive employment effect of Scenario C's USMCA exemption. Scaling their motor vehicles sector estimates to the Class 8 truck sub-sector (approximately 15–20 percent of total North American motor vehicle manufacturing by value) implies a medium-term employment gain of 15,000 to 35,000 North American jobs from full USMCA tariff relief.
Scenario-by-Scenario Employment and GDP Assessment Scenario A (IEEPA Baseline) represents the most tariff-laden environment, not including any potential Section 301 tariffs currently under investigation but not yet implemented. The combined burden of Section 232 tariffs on North American steel flows and elevated IEEPA tariffs on Chinese-origin components suppressed sector-wide output relative to a frictionless benchmark. Consistent with the Furceri et al. elasticity, this environment is estimated to have reduced sector GDP contribution by approximately 0.05 to 0.10 percent relative to a USMCA-exemption baseline, with a corresponding employment drag across the supply chain. Scenario B (Current, Post-IEEPA) partially relieves the Chinese-origin component burden for all OEMs, particularly for PACCAR. However, Section 232 tariffs continue to burden cross-border North American flows. The net employment effect is estimated to be modestly negative at the sector level—between −5,000 and −12,000 jobs relative to a USMCA-exemption baseline—because the relief primarily benefits the OEM with the most Chinese-origin exposure rather than those with the deepest North American supply chain integration. This is consistent with Flaaen & Pierce's finding that input cost channels are the dominant employment determinant in manufacturing tariff exposure. Scenario C (USMCA Universal Exemption) is estimated to generate the strongest positive employment and GDP effects. Full relief from Section 232 tariffs on North American inputs removes the single largest cost burden for DTNA and International and eliminates the competitive distortion that currently penalizes USMCA-aligned production. Drawing on Caliendo & Parro's NAFTA trade liberalization estimates scaled to the Class 8 sector, and corroborated by the Furceri et al. GDP elasticity applied in reverse (relief rather than imposition), the estimated medium-term employment effect is +15,000 to +35,000 North American jobs across OEM assembly and Tier 1–3 supply chains. The GDP contribution from the truck sector supply chain is estimated to improve by +0.03 to +0.07 percent of North American truck-sector output, representing a meaningful positive signal for investment in domestic and allied-country component manufacturing. Scenario D (New Section 301 at 25 Percent on Non-USMCA Inputs) presents the most ambiguous employment picture and the worst GDP outcome among the active policy options. While it restores competitive neutrality between OEMs, it does so by increasing costs across the industry. Applying the Flaaen & Pierce input cost employment elasticity to the additional tariff burden on all OEMs, the net employment effect is estimated to range from −3,000 to +5,000 jobs— a wide range with a confidence interval that includes zero, reflecting uncertainty about the relative strength of the domestic market protection effect versus the input cost channel. The central tendency of the literature, however, is that the input cost channel dominates for intermediate goods tariffs in integrated global manufacturing supply chains. Consistent with the Furceri et al. GDP elasticity and the Fajgelbaum et al. finding that broad tariffs of this magnitude impose aggregate real income losses of 0.04 percent of GDP or more, the GDP effect is estimated to be −0.01 to −0.02 percent of North American truck-sector output in the medium term.
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Table 4: Policy Option Comparison — Competitive, Employment, and GDP Assessment
Policy Option
Net COGS Impact — High Chinese Exposure (PACCAR)
Status Quo (postIEEPA, no change)
+1.2–1.8%
USMCA Universal Exemption (Recommended)
+2.5–3.5% (legacy S.232/S.301 on non-USMCA)
New S.301 @ 20% on NonUSMCA Inputs
New S.301 @ 25% on NonUSMCA Inputs
+2.8–3.5%
+3.5–4.8%
Net COGS Impact — USMCACentric OEMs (DTNA/Intl)
Est. North American Employment Effect (Direct + Indirect)
Est. North American GDP Effect (MediumTerm)
Competitive Neutrality
Trade Policy Alignment
+0.3–0.7%
−5,000 to −12,000 jobs sector-wide; mild positive spillover from cost relief for highChina-exposure OEM
Marginally negative to neutral (−0.01% to 0.00% sector GDP contribution); S.232 drag persists
No — inverted advantage for offshore inputs
Poor
~0% (fully relieved)
+15,000 to +35,000 jobs N. America (direct mfg. + supply chain); strongest gains at USMCAaligned OEMs and Tier 1–2 suppliers
+0.03% to +0.07% N. American GDP medium-term; cost relief drives investment and output expansion
Strong — rewards North American integration
Pro-trade; USMCAconsistent
+0.8–1.2%
+2,000 to +8,000 jobs net; new input cost burden partially offsets protectedsector gains per Flaaen & Pierce (2024)
−0.01% to +0.01% (near neutral); new tariff costs offset competitive neutrality gains
Approximate neutrality
Mixed — adds new tariffs
+1.0–1.6%
−3,000 to +5,000 jobs net; sector-wide cost inflation likely to suppress fleet demand and downstream employment
−0.02% to −0.01% N. American GDP; broad cost push consistent with Furceri et al. (2021) macro tariff elasticity
Strong, but raises allindustry costs
Restrictive — new broad tariffs
See Section VI and Appendix A for derivation methodology. Employment and GDP ranges are illustrative estimates based on applied academic literature; see text for academic sourcing. N. American = United States, Canada, and Mexico combined.
Note: Employment and GDP estimates are medium-term (3–5 year) North American effects derived from academic literature (see Table 5). All figures are illustrative; actual outcomes will depend on OEM adjustment speed, retaliation probability, and supply chain response.
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Table 5: Employment and GDP Estimate Derivation — Principal Sourcing Key Empirical Finding
Application to This Analysis
Estimate Derived
Furceri, Hannan, Ostry & Rose (2021) — World Bank Economic Review
A 3.6 ppt tariff increase → ~0.4% GDP decline over 5 years (advanced economies); unemployment rises modestly
Scales tariff rate changes in Scenarios B–D to GDP impact for the ~$45B Class 8 truck sector and its supply chain (~$200B gross output equivalent)
GDP elasticity of −0.11% per 1 ppt net tariff increase applied to N. American truck-sector output; used to bound all GDP estimates
Flaaen & Pierce (2024) — Review of Economics and Statistics
Industries with higher tariff exposure experience relative employment declines; input cost channel dominates protection benefit; countylevel unemployment rises
Identifies the net employment sign for Scenarios B and D (where input cost burden dominates); calibrates employment response for Scenario C (relief)
Input cost tariff of 1 ppt → net employment effect of −0.3% to −0.5% in exposed manufacturing; used to bound negative employment scenarios
Caliendo & Parro (2015) — Review of Economic Studies
NAFTA tariff reductions raised U.S. real wages and intra-bloc trade; motor vehicles sector among largest welfare contributors
Provides baseline multiplier for trade liberalization (USMCA exemption) on employment and wages in North American motor vehicle supply chains
USMCA-aligned tariff relief → +0.08% U.S. welfare gain comparable to NAFTA; scaled to truck sector share implies +15,000–35,000 N. American jobs
2018 tariff war: $51B consumer/importer losses (0.27% GDP); real income loss $7.2B net; tradeablesector workers most negatively affected by retaliation
Grounds the GDP and distributional employment estimates for Scenario D (new broad S.301 tariffs); retaliation risk amplifies negative employment outcome
Note: All employment and GDP figures in Table 4 are derived by applying the above academic elasticities to the estimated North American heavy-duty truck sector economic footprint (direct OEM employment ~85,000; total direct + indirect + induced ~1.5 million jobs; sector gross output ~$45B direct, ~$200B supply chain). Figures represent medium-term (3–5 year) effects. Wide ranges reflect uncertainty in passthrough, retaliation probability, and OEM adjustment speed.
Academic Source
Fajgelbaum, Goldberg, Kennedy & Khandelwal (2020) — Quarterly Journal of Economics
Source: Author derivation applying published empirical elasticities from Furceri et al. (2021), Flaaen & Pierce (2024), Caliendo & Parro (2015), and Fajgelbaum et al. (2020) to estimated North American heavy-duty truck sector economic footprint.
VII. POLICY OPTIONS: COMPARATIVE ANALYSIS Table 4 above summarizes the competitive, employment, and GDP implications of the four principal options. The analysis confirms that a universal USMCA exemption is the option best aligned with competitive neutrality, employment and GDP growth, and a pro-trade policy orientation. Additional Section 301 tariffs are analytically capable of restoring cost symmetry between OEMs but do so by raising costs across the board, with inferior employment and GDP consequences. The USMCA exemption approach has two additional advantages. First, it is legally robust: USMCA-based exemptions are consistent with the agreement's terms and present no novel constitutional questions following Learning Resources. Second, it is reversible and adjustable through the USMCA joint committee process—a structured, internationally accountable mechanism for policy adjustment that avoids the unilateral executive overreach the Supreme Court has now foreclosed. HEAVY-DUTY TRUCK TARIFF RELIEF • OCTOBER 2026
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VIII. POLICY RECOMMENDATIONS Recommendation 1 (Primary): Extend Universal USMCA Exemption from Section 232 and Section 301 Tariffs The administration should direct the Departments of Commerce and Treasury, in coordination with USTR, to implement a comprehensive exemption from Section 232 steel and aluminum tariffs—and from any remaining, renewed, or upcoming Section 301 measures—for all goods qualifying as USMCA-compliant under the agreement's rules of origin. This measure alone would eliminate the principal competitive distortion currently affecting the sector, is estimated to support 15,000 to 35,000 additional North American jobs in the medium term, and would generate a positive GDP contribution from the heavy truck sector supply chain.
Recommendation 2: Maintain Targeted, Product-Specific Measures for Genuine National Security Concerns Where specific components present documented national security vulnerabilities—based on formal agency findings, supply concentration analysis, and adversarial source-country risk assessments—targeted Section 232 or Section 301 measures, applied on a product-specific basis, remain appropriate. These should be designed with clear scope and duration, administered through a robust exclusion process, and subject to periodic review as North American supply alternatives develop.
Recommendation 3: Avoid Broad New Section 301 Tariffs on Non-USMCA Inputs as a Primary Instrument A new Section 301 tariff on non-USMCA components could restore competitive neutrality between OEMs but does so by raising costs industry-wide, generating suboptimal employment and GDP outcomes compared to the USMCA exemption approach. Consistent with the findings of Flaaen & Pierce (2024) and Furceri et al. (2021), input cost tariffs in manufacturing sectors are likely to suppress net employment even as they redistribute market share. This paper does not recommend new broad Section 301 tariffs as a primary instrument.
Recommendation 4: Establish a Monitoring Framework for Competitive Effects Given the concentrated structure of the Class 8 market, the Federal Trade Commission, in coordination with USTR and the Department of Commerce, should establish a periodic monitoring framework to assess whether tariff policy is producing unintended competitive distortions. Market share data, OEM cost disclosures, employment data at major OEM and supplier facilities, and fleet procurement trends should be included in the monitoring scope.
Recommendation 5: Engage USMCA Partners on Supply Chain Investment The administration should engage Canada and Mexico through USMCA joint committee mechanisms to identify opportunities for accelerated North American supply chain development in heavy-duty truck components. Targeted investment facilitation and regional content certification streamlining would complement the tariff relief measures and accelerate the employment gains projected under Scenario C.
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IX. CONCLUSION The Supreme Court's decision in Learning Resources, Inc. v. Trump was less a legal milestone than it was an invitation to develop a more coherent, durable, and economically rational trade policy framework for the U.S. industrial sector. In the heavy-duty truck market specifically, the IEEPA tariff regime's removal has once again exposed a pre-existing distortion: Section 232 tariffs that penalize USMCA-compliant North American production relative to offshore sourcing. Left unaddressed, this distortion will erode the investment case for domestic supply chain development and introduce perverse sourcing incentives. The preferred solution is not to replace one set of overly broad tariffs with another. It is to extend a universal exemption from Section 232 and Section 301 tariffs to all USMCA-compliant goods, using the existing trade agreement infrastructure to reward North American integration with regulatory relief. The academic literature supports this conclusion unambiguously: tariff relief on intermediate goods in integrated manufacturing supply chains is more likely to support employment and GDP than new input cost burdens, and the specific estimates derived here—a mediumterm North American employment gain of 15,000 to 35,000 jobs and a positive GDP contribution of 0.03 to 0.07 percent of sector output—are grounded in peer-reviewed research from leading economic journals. Where genuine national security concerns require targeted measures on specific components from specific source countries, those measures can and should be designed with precision, grounded in formal findings, and administered transparently. Sweeping, undifferentiated emergency tariff authority has been curtailed by the courts so the appropriate response is now genuine policy discipline—using the right tools, at the right scale, for the right purposes—and ensuring that the resulting framework supports, rather than suppresses, the North American manufacturing employment base upon which both commercial and national security objectives ultimately depend.
APPENDIX A: METHODOLOGICAL NOTE The cost impact estimates presented in this analysis are derived from publicly available data sources, including OEM annual reports and 10-K filings, USMCA certification disclosures, industry analyst reports (S&P Global Mobility, ACT Research), and U.S. International Trade Commission tariff and import data. Supply chain exposure percentages represent estimated ranges based on disclosed sourcing information and are not derived from proprietary or non-public data. In particular, none of the four OEMs publicly discloses the Chinese-origin share of its components, and no authoritative third-party source—including the U.S. International Trade Commission's Section 232/301 studies or the OEMs' earnings disclosures—publishes that figure at the firm level. The Chinese-origin component shares used here are therefore qualitative estimates, presented as Low / Moderate / High bands with indicative ranges, informed by each firm's assembly geography, disclosed localization initiatives, and the USMCA regional-value-content requirements its production must satisfy. The analysis depends on the relative ordering of these exposures across firms rather than on any single point estimate. COGS impact calculations apply applicable tariff rates to estimated component value shares, net of any applicable exemptions and drawback provisions. The analysis does not model demand elasticity effects, margin absorption dynamics, or second-order macroeconomic impacts at the economy-wide level. It is intended to illuminate the relative competitive cost position of the four OEMs under alternative tariff regimes, not to estimate aggregate economic welfare effects. Employment and GDP estimates in Section VI and Table 4 are derived by applying published empirical elasticities from Furceri, Hannan, Ostry & Rose (2021), Flaaen & Pierce (2024), Caliendo & Parro (2015), and Fajgelbaum, Goldberg, Kennedy & Khandelwal (2020) to the estimated North American heavy-duty truck sector economic footprint. The sector footprint is estimated as: direct OEM manufacturing employment ~85,000; Tier 1–3 supplier employment ~500,000–700,000; total direct/indirect/induced employment ~1.5 million; direct OEM gross output HEAVY-DUTY TRUCK TARIFF RELIEF • OCTOBER 2026
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~$45B; full supply chain gross output ~$175–200B. These figures are derived from industry association data (ATA, MEMA) and BLS manufacturing subsector statistics. All employment and GDP estimates should be treated as illustrative order-of-magnitude ranges for policy analysis purposes. Actual outcomes will depend on OEM-specific sourcing adjustment speed, fleet purchasing response, retaliation probability from USMCA trading partners, and macroeconomic conditions at the time of policy implementation.
APPENDIX B: SELECT PEER-REVIEWED LITERATURE FOR FURTHER READING Amiti, M., Redding, S. J., & Weinstein, D. E. (2019). The Impact of the 2018 Tariffs on Prices and Welfare. Journal of Economic Perspectives, 33(4), 187–210. One of the most widely cited empirical studies of the 2018 U.S. tariff actions, this article finds that the full incidence of the tariffs fell on domestic consumers and importers rather than foreign exporters, resulting in an estimated reduction of U.S. real income of $1.4 billion per month by end-2018. The authors document complete pass-through of tariff costs into domestic prices, dramatic supply-chain disruption, and reduced availability of imported varieties—findings directly relevant to the analysis of Section 301 and Section 232 cost burdens in the heavy-duty truck sector.
Fajgelbaum, P. D., Goldberg, P. K., Kennedy, P. J., & Khandelwal, A. K. (2020). The Return to Protectionism. Quarterly Journal of Economics, 135(1), 1–55. Using a general-equilibrium model of the U.S. economy, this landmark study analyzes the 2018 U.S.-China trade war and finds losses to U.S. consumers and importing firms of $51 billion (0.27 percent of GDP), with an aggregate net real income loss of $7.2 billion. The paper also shows that tradeable-sector workers in manufacturing counties were most negatively affected by retaliatory tariffs, illustrating the distributional employment effects that broad tariff escalation generates. Used in Section VI to ground the GDP and employment estimates for Scenario D.
Caliendo, L., & Parro, F. (2015). Estimates of the Trade and Welfare Effects of NAFTA. Review of Economic Studies, 82(1), 1–44. This study quantifies the trade and welfare effects of NAFTA's tariff reductions using a Ricardian model incorporating sectoral linkages, intermediate goods trade, and production heterogeneity. The motor vehicles sector is identified as among the largest contributors to welfare gains from NAFTA liberalization. Scaled to the Class 8 truck sub-sector and applied in reverse (relief rather than imposition), Caliendo & Parro's framework grounds the +15,000 to +35,000 North American job estimate for Scenario C's USMCA universal exemption in Section VI.
Bagwell, K., & Staiger, R. W. (1999). An Economic Theory of GATT. American Economic Review, 89(1), 215–248. A foundational paper in the economics of international trade agreements, Bagwell and Staiger demonstrate that GATT's core principles of reciprocity and non-discrimination can be understood as mechanisms that help governments escape the terms-of-trade externality driving non-cooperative (protectionist) equilibria. Their framework implies that unilateral tariff escalation—of the kind exercised under IEEPA and now subject to judicial limits—is precisely the behavior that international trade commitments are designed to prevent.
Arkolakis, C., Costinot, A., & Rodríguez-Clare, A. (2012). New Trade Models, Same Old Gains? American Economic Review, 102(1), 94–130. This influential theoretical paper establishes that, across a broad class of trade models, the gains from trade liberalization can be summarized by two statistics: the share of expenditure on domestic goods and the trade elasticity. The robustness of the pro-trade welfare result across disparate model architectures provides strong theoretical grounds for favoring trade-opening measures (such as USMCA-based exemptions) over new restrictive barriers. HEAVY-DUTY TRUCK TARIFF RELIEF • OCTOBER 2026
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Grossman, G. M., Helpman, E., & Lhuillier, H. (2023). Supply Chain Resilience: Should Policy Promote International Diversification or Reshoring? Journal of Political Economy, 131(12), 3462–3496. Directly relevant to the national security and supply-chain resilience arguments in this paper, Grossman, Helpman, and Lhuillier find that a subsidy for sourcing diversification achieves the constrained social optimum and dominates blanket reshoring or offshoring mandates. This result supports the recommendation that USMCA-aligned diversification— spreading supply risk across North American allied partners—is preferable to the blunt instrument of broad tariffs intended to force reshoring.
Furceri, D., Hannan, S. A., Ostry, J. D., & Rose, A. K. (2021). The Macroeconomy After Tariffs. World Bank Economic Review, 35(2), 468–486. Drawing on a panel of 151 countries and 50 years of data, this cross-country empirical study finds that a 3.6 percentagepoint tariff increase leads to an approximately 0.4 percent decline in GDP over five years, with magnified effects for advanced economies. The paper also documents persistent unemployment increases and productivity declines. The implied GDP elasticity of −0.11 percent per percentage-point of net tariff increase is directly used in Section VI to bound the GDP estimates for all four policy scenarios.
Flaaen, A., & Pierce, J. R. (2024). Disentangling the Effects of the 2018–2019 Tariffs on a Globally Connected U.S. Manufacturing Sector. Review of Economics and Statistics, 103(4), 712–725. Using establishment-level U.S. manufacturing data, Flaaen and Pierce find that industries more exposed to tariff increases experienced relative reductions in employment, because the negative effect of higher input costs on cost competitiveness outweighed the positive effect of domestic market protection. They also document broader labor market impacts at the county level: higher unemployment and lower labor force participation in more tariff-exposed areas. This paper's employment estimates for Scenarios B and D apply Flaaen and Pierce's input cost employment elasticity (approximately −0.3 to −0.5 percent employment per 1 percentage-point increase in effective input tariff rates) to the truck sector's estimated supplier employment base.
Grossman, G. M., & Helpman, E. (1994). Protection for Sale. American Economic Review, 84(4), 833–850. This seminal paper models tariff formation as the outcome of lobbying by organized industry groups, showing that protection is systematically biased toward concentrated producer interests at the expense of diffuse consumer welfare. The model provides a theoretical explanation for the persistent tendency of industrial policy, including the IEEPA tariff framework examined in this paper, to overweight producer protection relative to aggregate economic efficiency, and reinforces the case for rule-based frameworks (USMCA, WTO) that constrain unilateral executive tariff discretion.
Amiti, M., Redding, S. J., & Weinstein, D. E. (2020). Who's Paying for the US Tariffs? A Longer-Term Perspective. AEA Papers and Proceedings, 110, 541–546. This follow-on study confirms that domestic consumers and importers continued to bear the full burden of the 2018 tariffs even as supply chains adjusted, reinforcing the conclusion that tariff-based industrial policy in capital-intensive manufacturing sectors generates sustained consumer and producer costs that undermine the broader economy.
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