Background and Context
The United States-Mexico-Canada Agreement (USMCA) is set to enter a review phase, preceding the renegotiation agreed upon in 2018. This development comes as a result of the United States’ new tariff policy, which has surpassed the existing trade agreement.
Donald Trump has publicly declared his intention not to sign the USMCA. Of the $31 trillion generated by trade between the economies of the United States, Canada, and Mexico, 95% belong to the US.
The initial version of the agreement, known as the TLC, benefited US farmers but allowed the growth of the automotive industry in Mexico and Canada. Initially, the promise was that workers’ wages would improve; however, only skilled labor accessed international wage tables. The narrative of developing the world’s largest market in the region did not turn out to be entirely accurate.
USMCA’s History and Challenges
For 25 years, the TLC remained unchanged without a driving force to hold political accountability for the agreement. It lost political support, especially in the United States.
The USMCA modified origin rules to encourage more North American, particularly US, content compared to Asian invasion. However, one drawback is that the favored nation status for automobiles in the US is 2.5% — known as the “chicken tax” — which effectively reduces incentives to increase regional production.
The Trump administration imposed Section 232 on automobiles to compensate for this disadvantage.
Current Status and Future Implications
As the USMCA review progresses, Americans are studying the adoption of non-automotive origin rules.
“The USMCA is law,” stated President Claudia Sheinbaum. Secretaries of Economy, Marcelo Ebrard, and Agriculture, Julio Berdegué, have spent many weeks in the US capital addressing their counterparts’ demands.
Jamieson Greer, the US ambassador, was excluded from this whirlwind — leaving a crucial detail indicating the future: no high-level trilateral meetings were held in 2025, involving Greer.
“There could be a couple of annexes attached to the agreement… or there could be a replacement,” Greer mentioned in early December at the Atlantic Council. “There are many things that could be done. However, there might be certain areas where trilateral discussion would make sense. Origin rules are one of them. Do we align in certain measures on foreign trade policies? That could be another. Critical minerals could be another area.”
Secondary Effects
Interference?
Beyond its offensive against Ukraine, the Russian Federation deliberately fuels anti-US sentiment in various regions worldwide. Reports originating from Washington DC and picked up by communicators on both sides of the Rio Grande identified Mexico as one of the scenarios for a Kremlin-backed influence campaign called Doppelgänger.
Perspectives
Morning Consult concluded 2025 with a report on consumer confidence worldwide. In terms of political risk, the Americas are one of the regions with the highest political risk, alongside Europe. Economic volatility remains the dominant theme in most countries as 2026 begins.
Mexico starts the year with 110.3 points on the consumer confidence index and a BB+ rating on political risk, while Brazil records 114.5 points and a BB rating.
