Terminal voltage distortion in surface-mounted permanent magnet machines caused by local magnetic saturation significantly influences the machine performance. Thus, this paper focuses on the minimization methods for such phenomenon. The traditional harmonics minimization methods, such as rotor skewing and nonuniform airgap (rotor and stator shaping), are investigated. However, neither of them can effectively reduce the terminal voltage distortion since the local magnetic saturation in tooth-tips always exists, especially for designs with small or closed slot openings. This paper proposes that the terminal voltage distortion could be essentially reduced when larger slot opening width is adopted, since the local magnetic saturation by tooth-tip leakage flux decreases as a consequence. A design trade-off on slot opening is recommended to balance the terminal voltage distortion and other performance, e.g., the torque quality and flux weakening capability. The results show that the optimal trade-off should be made according to the machines most frequent operation conditions. Two prototypes with different design tradeoffs have been manufactured and tested as examples to validate the analyses.