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Mexico and the United States are trying to hammer out a bilateral trade agreement before American voters head to the polls in November, turning what was supposed to be a three-country review process into a two-party sprint.
The USMCA’s mandatory six-year review kicked off in 2026, but Canada has effectively been left on the bench while Mexico City and Washington negotiate directly. Multiple rounds of talks since May have produced what both sides describe as steady progress, with a fourth round scheduled for September in Washington.
What’s actually on the table
The US wants to raise the percentage of North American content required in vehicles sold tariff-free across the continent.
Mexico, for its part, wants relief from Section 232 tariffs on steel, aluminum, and automobiles.
A third dimension involves mechanisms to limit third-country influence in supply chains, with China being the obvious target. Washington has grown increasingly vocal about Chinese companies routing goods through Mexico to access the US market, and any deal will almost certainly include provisions aimed at closing that loophole.
US Trade Representative Jamieson Greer, Mexican Economy Secretary Marcelo Ebrard, President Claudia Sheinbaum, and Commerce Secretary Howard Lutnick have all been directly involved in the process.
The numbers driving the urgency
Mexico posted a record goods trade surplus of $196.9 billion with the US for the full year of 2025. The first half of 2026 was on pace to match or exceed that figure, with a $102.6 billion surplus through June.
In July 2026 alone, Mexico’s bilateral goods trade surplus came in at $26.31 billion.
The review process itself carries structural pressure. The US declined to grant a 16-year extension to the USMCA on July 1, triggering a mechanism that subjects the agreement to annual reviews until 2036.
Canada’s conspicuous absence
Canada’s exclusion from the current round of serious talks marks a notable departure from the USMCA’s trilateral framework. Parallel discussions between Washington and Ottawa have stalled, leaving Canada watching from the sidelines as its two partners negotiate terms that will inevitably shape the continental trade architecture.
What this means for markets and supply chains
A deal that removes or reduces Section 232 tariffs could meaningfully lower input costs for manufacturers on both sides of the border, particularly in the auto sector where steel and aluminum tariffs have been a persistent headache.
Stricter North American content requirements would force automakers and parts suppliers to reconfigure supply chains, potentially increasing costs in the short term while redirecting investment toward regional production. Companies that currently source components from Asia and assemble in Mexico for US export would face the most disruption.
Both nations have expressed optimism about reaching at least an interim arrangement by late 2026, though officials have acknowledged that some of the more complex issues may not be fully resolved until 2027.
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