National flags of Mexico and the United States
As the World Cup hosted by the US, Canada and Mexico had just concluded, bilateral talks between US and Mexican trade negotiators kicked off on July 21 to revise the US-Mexico-Canada Agreement (USMCA), after the Trump administration declined to renew the USMCA at the mandatory six-year joint review on July 1.
"For Mexico, the larger objective would be to preserve the nature of free trade and the spirit of free movement of goods and services in the North American region as much as possible," noted Roberto Zapata, former ambassador and permanent representative of Mexico to the WTO from 2017 to 2019, in a recent exclusive interview.
Inevitable negotiations now and in future
According to Zapata, the first formal discussions on changes to the North American trade agreement began on July 21, and further negotiations on the USMCA are unavoidable, as Mexico and the US both recognize the huge importance of the pact for their economies. Issues involving autos, steel, aluminum, agriculture and labor are expected to be on the table.
Zapata said that avoiding tariffs on sectors critical to the Mexican economy, such as the automotive, steel and heavy-vehicle industries, is one of Mexico's top priorities.
Section 232 investigations, conducted under the authority of the Trade Expansion Act of 1962, assess whether imports threaten US national security and primarily cover strategic sectors such as steel, automobiles, chips and pharmaceuticals.
Tariffs imposed under Section 232 on national security grounds currently apply to Mexico, putting pressure on Mexican exports. Mexico is the main trading partner of the US, while the US accounts for some 80 percent of Mexican exports, according to the US Trade Representative (USTR).
However, as Zapata observed, Mexico's quest for tariff exemptions runs counter to the US objective of maintaining tariffs on Mexican imports.
"Because tariffs, in their view, help the US's objective of addressing the trade deficit with Mexico. They are opposing views. That creates a little bit of tension in the conversations between Mexico and the US," he added.
Data from USTR showed that the US goods trade deficit with Mexico reached roughly $197 billion in 2025, a 14.8 percent increase over 2024. Mexico has become one of the world's leading manufacturing platforms and a critical link in North America's supply chains. Total exports reached a record $664.8 billion in 2025, while exports during the first five months of 2026 totaled $317.2 billion, up 22.6 percent from the same period a year earlier.
The former trade official added that, at a broader conceptual level, Mexico, the US and Canada share the aim of bringing the three countries closer together and enhancing regional integration.
"But that's an overall objective. How you get into the details of the objective may differ a little bit," Zapata noted.
Mexican Economy Minister Marcelo Ebrard gestures as he speaks during a press conference in Mexico City on May 27, 2026.
Why does the US not renew the USMCA
As the date for negotiations between the US and Canada on the USMCA remains uncertain, the Trump administration put pressure on its main trade partner and announced 50 percent tariffs on certain Canadian goods by invoking Section 338 of the Tariff Act of 1930 on July 21.
In Zapata's view, the US may be reluctant to renew the USMCA because it appears dissatisfied with the status quo of its international trade under the regional trade pact.
In his view, the US administration regards the annual review process of the pact as an opportunity to address longstanding US concerns within North America that have not been resolved in the past.
Zapata listed several issues in US bilateral trade relations with Mexico, such as labor and energy concerns and Mexico's huge trade surplus with the United States. As for domestic factors behind the move, he said the Trump administration's trade policy aims to encourage investment in the United States.
The baseline scenario, according to Zapata, is that the USMCA remains in force. "The US is somehow using this review to perhaps eventually come up with a new template for international trade rules, in a way that whatever USMCA outcome the US is considering could help advance its interest in shaping new global trade rules," he said.
Canada and Mexico now want the USMCA to continue, as the pact has benefited both countries amid the tariffs imposed by Trump in 2025. Goods traded under the pact have been largely exempt from the added taxes.
The USMCA has also been a boon for US businesses, which export products such as automotive parts, aircraft, petroleum and computers to Canada and Mexico. An analysis by the Peterson Institute for International Economics showed that the majority of exports from some US states go to Canada and Mexico and are shipped under the USMCA.
A predicament for Mexico
Given the annual review of the USMCA, this former Mexican trade official outlined the challenges Mexico currently faces.
On the one hand, Mexico now faces pressure from the US to align as closely as possible with US interests, standards and regulations through the USMCA review.
On the other hand, integration within North America, both under the former North American Free Trade Agreement (NAFTA) and the current USMCA, has also benefited Mexico by helping it integrate with the rest of the world and connect its manufacturing base with supply chains from Europe, Latin America and Asia.
"Mexico has this challenge of trying to find the proper balance between further integration with North America, which is totally desirable for the Mexican economy," Zapata noted.
He predicted that Mexico would face difficulties in the review as it seeks to balance these two goals. The country is under pressure to navigate the situation carefully. Mexico cannot assume that it can rely solely on sourcing from North America, as many supply chains originate in other parts of the world.
Reporter | Zhang Ruijun
Photos | CFP Photo
