Mexico and the United States are seeking to reach an interim bilateral trade agreement before the midterm elections for Congress on November 3, Reuters reported, citing six sources from both countries familiar with the negotiations, BTA reported.
The failure of trade talks between Washington and Canada has given added urgency to the efforts. The agreement under discussion would allow Mexico to receive relief from some US tariffs in exchange for concessions on US demands, including on the share of US components in cars and controls on Chinese investment.
The main obstacle is US tariffs on steel, aluminum, cars and car parts, imposed on national security grounds under the so-called Section 232. Mexican and Canadian steel imports into the United States are taxed at 50 percent, and cars are subject to a 25 percent tariff.
US President Donald Trump has negotiated lower auto tariffs for other trading partners – 15 percent for Japan, the European Union and South Korea and 10 percent for the UK. This means that some cars from those countries are taxed at lower rates than those imported from Mexico and Canada.
Automakers believe that Washington could offer Mexico the terms previously discussed with Canada: a 15 percent tariff on car imports with an additional discount for American components. This would lower the effective rate to about 7 percent. Before the talks broke down last month, Canada appeared close to a breakthrough on those tariffs and other trade issues, Reuters reported.
In return, Mexico is expected to make concessions on demands for a greater share of American components in cars, especially engines, electronics and software, according to a second source in Mexico. The country opposes explicit requirements for American content, but that does not rule out working on measures to increase it, the source said. The final form of such a compromise remains unclear.
There is no official deadline for reaching an agreement. However, representatives from both sides see political benefits in reaching an agreement before the elections, in which Trump's Republican Party risks losing control of Congress. An agreement would allow both leaders to claim success in front of their domestic audiences.
According to the first source in Mexico, time is of the essence for the government because of concerns about the weak economy and declining credit ratings of the government's debt. The administration of President Claudia Sheinbaum, which unveiled the 2027 budget this week, sees a trade deal with the United States as key to calming markets and investors, he added.
“There are no specific deadlines at the moment“, a spokesman for Mexico's economy ministry said, stressing the government's commitment to continuing dialogue with Washington. The Office of the U.S. Trade Representative and the White House did not immediately respond to Reuters requests for comment.
Trade talks between the United States and Canada broke down last month, after which the dispute over tariffs between the two countries escalated. On Tuesday, Washington banned imports of a wide range of Canadian alcoholic beverages, motorcycles and dairy products, and Ottawa promised to respond to U.S. tariffs with equivalent measures.
According to Reuters, the development has reinforced Mexico's strategy of avoiding direct confrontation with Washington and seeking tariff relief through cooperation. The country directs more than 80 percent of its exports to the United States.
Amid the increased contacts, U.S. Commerce Secretary Howard Lutnick spoke with Sheinbaum via video conference on Thursday. The meeting was originally planned to be held in person.
The conversation took place less than two weeks after Sheinbaum proposed legislation that would give the government new powers to screen and block acquisitions of Mexican companies by foreign investors. The proposal would provide for an investment screening mechanism similar to those in place in the United States and Canada. It is widely seen as a response to U.S. pressure for tighter controls on Chinese investment, the agency notes.
Representatives of Mexico and Canada have publicly stressed their commitment to preserving the trilateral trade agreement with the United States. However, some Mexican officials have said in private that their country should not sacrifice its own interests to secure a deal for Canada.
According to an auto industry source, the Trump administration is aiming to isolate Ottawa by reaching a deal with Mexico before significant new Canadian tariffs take effect on Jan. 1. Diego Marroquin Bitar, a North American trade expert and consultant, believes such an agreement could lower consumer prices in the United States and bring political success to the US administration. He says US officials could hold Canada responsible for the lack of an agreement.
The bilateral talks are aimed at an interim agreement while issues surrounding the trilateral trade agreement between the United States, Mexico and Canada are discussed. Its future became uncertain in July when Washington did not agree to extend it for another 16 years. The agreement remains in force and is subject to annual reviews, and the Trump administration is using the process to demand further concessions from its two neighbors.