Mexico and the United Nations are rushing to finalize a bilateral trade agreement before the US midterm elections, which are less than eight weeks away. According to six sources in both countries familiar with the negotiations, the push for a deal intensified following the breakdown of trade talks between Washington and Canada. “We both want to reach an agreement before the midterm elections,” one Mexican official said on condition of anonymity.
The negotiations aim to secure a temporary bilateral deal that could provide Mexico with relief from certain US tariffs in exchange for concessions on Washington’s demands, specifically regarding the share of US‑made content in vehicles and Chinese investment. While there is no formal deadline, officials from both countries see political advantages in reaching an agreement by November 3, when the Republican Party of former President Donald Trump risks losing control of Congress.
A deal would allow both leaders to present it as a political achievement amid domestic challenges. For the government of Claudia Sheinbaum, which presented its 2027 budget this week, a trade agreement with the US is vital to reassure markets and investors amid a sluggish economy and credit‑rating downgrades for Mexican debt. A spokesperson for the Mexican Ministry of Economy stated that there are currently no specific deadlines and that the government continues to engage in dialogue with Washington.
Strategy to avoid confrontation
Mexico’s desire to reach a deal with the US grew stronger after trade talks between Washington and Canada collapsed last month, leading to an escalating tariff dispute between the two nations. On Tuesday, the US banned imports of a wide range of Canadian goods, including alcohol, motorcycles, and dairy products, and Ottawa vowed to retaliate with mirror tariffs.
The failure of the Canadian negotiations has reinforced Mexico’s strategy of avoiding direct confrontation with Washington, hoping to secure tariff relief through cooperation. A Mexican source described this approach as “playing it soft and continuing to cooperate.” More than 80% of Mexican exports go to the US.
The pace of negotiations has also accelerated: on Thursday, US Secretary of Commerce Howard Lutnick (identified in reports as the official leading the talks) held a virtual meeting with Mexican President Claudia Sheinbaum to discuss trade. The meeting was originally planned to be held in person.
Less than two weeks earlier, Claudia Sheinbaum proposed a bill granting the government new powers to review and block foreign acquisitions of Mexican companies. This investment‑screening mechanism is expected to mirror systems currently in place in the US and Canada. It is widely viewed as a response to American pressure to tighten controls on Chinese investment.
The US‑Mexico talks are seen as an attempt to secure a temporary bilateral agreement while Washington, Mexico City, and Ottawa continue to discuss the trilateral USMCA agreement. The deal was called into question in July after the US refused to extend it for another 16 years. It remains in effect, however, and is subject to an annual review that the administration of former President Donald Trump is using to extract further concessions from Canada and Mexico.
Potential concessions on vehicles
One of the main obstacles to a temporary trade deal remains the Section 232 tariffs on steel, aluminum, cars, and auto parts. Under these tariffs, imposed for national security reasons, Mexican and Canadian steel are subject to a 50% US tariff, while cars face a 25% levy.
Meanwhile, the administration of former President Donald Trump has negotiated lower automotive tariffs with other trading partners: 15% for Japan, the European Union, and South Korea, and 10% for the United Kingdom. Consequently, some vehicles from these countries face lower tariffs than those imported from Mexico and Canada.
Before the Canadian talks collapsed, Ottawa was reportedly close to a deal with Washington regarding Section 232 tariffs and other trade issues. This has fueled speculation that Mexico could quickly secure similar terms.
Several automakers believe Washington may eventually offer Mexico the same framework discussed with Canada: a 15% tariff on car imports with additional reductions for using US‑made content. In that scenario, the effective rate could be around 7%.
In return, Mexico is expected to make concessions on US demands to increase the share of American content in vehicles, particularly in engines, electronics, and software. A second Mexican source noted that while Mexico opposes direct mandates for such requirements, it does not mean it will not work on a mechanism to increase American content. The source added that the final form of a potential compromise remains the “main issue.”
