Economic uncertainty has taken a toll on Mexico’s growth, with investment plummeting by 21% in the first quarter compared to the same period last year, according to figures from the Central Bank. In response, Mexican officials have reversed their stance on reviewing the U.S.-Mexico-Canada (USMCA) trade agreement.
The shift is driven by a desire for long-term certainty around Mexico’s trade relationship with its largest export market, the United States. Three government sources told Reuters that the early review is also being pushed due to U.S. President Donald Trump’s apparent willingness to discuss the matter sooner rather than later.
Mexico’s Economy Minister Marcelo Ebrard has indicated that he expects the review process to begin as soon as September, despite not being scheduled until 2026 under the original agreement. This move highlights the importance of maintaining a good relationship with Trump, who is perceived to hold significant leverage in these negotiations.
Juan Carlos Baker, Mexico’s former chief negotiator for USMCA, warns that trying to appease Trump is crucial for Mexico’s economic interests. “If he believes Mexico is not playing ball, you might be risking he will one day show up and announce the U.S. is exiting the agreement altogether,” Baker said.
The uncertainty surrounding trade rules has already had a significant impact on Mexico’s economy. The Central Bank recently cut its GDP forecast for this year to just 0.1%, while the International Monetary Fund predicts a contraction of -0.3%.
According to Emilio Romano, president of Mexico’s Bankers Association, “uncertainty kills investment.” With over 40% of Mexico’s GDP dependent on U.S.-Mexico trade, these negotiations are critical to the country’s economic well-being.
The importance of maintaining good relations with Trump extends beyond USMCA. Mexican officials have delayed signing an updated trade agreement with the European Union for fear that it could jeopardize trade talks with the United States, according to a European official.
Initially, Mexico had planned to wait as long as possible before reviewing USMCA, allowing time to resolve bilateral issues such as tariffs imposed due to fentanyl trafficking and migration. However, this stance is in contrast to Canada’s approach, with Prime Minister Mark Carney stating that his country wants to make progress on these issues before opening talks on USMCA.
Source: Reuters
