A Bad USMCA Rewrite Will Cost Mexico More Than No Deal
Key Points on USMCA and Mexico’s Economic Position
The United States–Mexico–Canada Agreement (USMCA) remains a critical trade framework for North America. However, recent developments indicate growing tensions between the U.S. and Mexico, particularly over issues such as rules of origin, non-tariff barriers, and labor standards.
Challenges in the USMCA Framework
- Rules of origin and dispute resolution mechanisms remain contentious, with Mexico expressing concerns over the fairness and transparency of these provisions.
- Non-tariff barriers and regulatory differences pose significant challenges to cross-border trade and investment.
- Water disputes and trade tensions have further strained relations between the U.S. and Mexico, potentially undermining the stability of the agreement.
Impact of U.S. Tariff Policies on USMCA
U.S. tariffs imposed on Canadian and Mexican goods have been criticized for violating the spirit of USMCA. For instance, in March 2025, a 25% tariff was implemented, prompting Canada and Mexico to accuse the U.S. of breaching the agreement. The U.S. later reversed the tariffs, but the incident highlights the fragility of the pact.
Analysis of Economic Outcomes
While Mexico’s integration into global value chains has improved under USMCA, with value-added content in Mexican exports to the U.S. increasing from 72.6% in 2017 to 73.7% in 2024, the overall economic impact remains mixed. The U.S. trade deficit with Mexico has widened, raising concerns about long-term economic sustainability.
Experts argue that scrapping the USMCA would result in greater economic damage than a poorly negotiated rewrite, as the current agreement provides a baseline of stability and integration.