Introduction
With the United States government, marked by unilateralism in global decisions, the USMCA (United States-Mexico-Canada Agreement) is a crucial agreement, especially given the current tariff madness affecting free trade and the global economy.
Current Tariff Landscape
More than 80% of trade between USMCA members pays less than 7.0% in tariffs. However, the remaining products not complying with the USMCA’s rules of origin face tariffs of 35% for Canada and 25% for Mexico. Additionally, 25% tariffs are imposed on steel and aluminum exports to the US.
USMCA’s Demands for Vigilance
Given the unpredictable nature of the Trump administration, which has turned tariffs into a political weapon, careful monitoring is required under the USMCA.
Non-Tariff Concerns in Future Negotiations
Roberto Morales, in an analysis for El Economista, outlined four key concerns for Mexico’s negotiators: 1) insufficient protection of intellectual property; 2) slow response from health authorities; 3) lack of regulatory neutrality as normative bodies in competition and telecommunications disappear; and 4) a worse competitive climate in the energy sector following constitutional reform granting state-owned enterprises precedence.
Critical Perspective on US Position
Kennet Smith, an international trade specialist, critiques the US stance. He states, “I am concerned that the United States intends to continue securing concessions from Mexico, leading to a USMCA review with three tariff blocks (migration/fentanyl; automotive; steel and aluminum) plus tariffs Trump plans on semiconductors, trucks, turbines, copper, etc. Mexico should not accept permanent tariffs (or ‘base’ as Trump calls them).
Challenges for Mexico
Mexico’s trade has positively evolved, largely due to its orientation towards the US market. In 2024, the bilateral trade value between Mexico and the US was $930 billion. Mexican exports account for 37% of its GDP.
Nearshoring and Mexico’s Expansionist Narrative
Parallel to USMCA negotiations, Mexico’s government and businesses have emphasized nearshoring within their expansionist narrative. The goal is to attract global supply chains, contributing to capital formation. However, for companies to establish in Mexico, essential elements like infrastructure, water, energy, skilled labor must be provided. Challenges need to be measured and addressed.
Key Questions and Answers
- What is the USMCA? The United States-Mexico-Canada Agreement (USMCA) is a trade agreement between the United States, Mexico, and Canada that succeeded the North American Free Trade Agreement (NAFTA).
- What are the current tariff rates under USMCA? Over 80% of trade between USMCA members pays less than 7.0% in tariffs, while the remaining products face 35% for Canada and 25% for Mexico. Steel and aluminum exports to the US are subject to 25% tariffs.
- What non-tariff concerns exist in USMCA negotiations? Concerns include insufficient intellectual property protection, slow health authority responses, loss of regulatory neutrality, and a worsening competitive climate in the energy sector.
- What is nearshoring, and why is it important for Mexico? Nearshoring refers to the relocation of business processes to neighboring countries, like Mexico. It aims to attract global supply chains and capital formation, but requires addressing challenges related to infrastructure, labor, and regulatory environment.
