US, Mexico Resume USMCA Trade Talks as Trump Hits Canada with New Tariffs

U.S. and Mexican trade negotiators launched a third round of bilateral talks on Tuesday to try to revise the North American trade agreement, just as President Donald Trump said he would impose new duties on Canada. The talks, which exclude Canada, are set to run for three days and are the first formal discussions on changes to the U.S.-Mexico-Canada Agreement since the Trump administration declined to extend the six-year-old regional trade pact on July 1.

The move started a clock to wind down USMCA within 10 years unless the three countries agree on changes. The U.S. Chamber of Commerce urged Trump to keep intact USMCA's trilateral structure, tariff-free access and strong enforcement that underpin $1.6 trillion in North American trade. "For business, USMCA provides what every job creator needs: certainty," said Isabel Quiroz, who heads the group's U.S.-Mexico Economic Council.

Trump's Goals for USMCA

U.S. Trade Representative Jamieson Greer, who is due to join the talks on Wednesday, said Trump's "No. 1 goal" for USMCA was to lower U.S. trade deficits with Canada and Mexico and to reshore more manufacturing to the U.S. The U.S. goods trade deficit with Mexico grew last year by $28 billion, or 17%, to $197 billion, according to data from the U.S. Census Bureau. The U.S. trade gap with Canada fell by $12.9 billion, or 21%, last year to $48.3 billion.

"We want the outcomes to make sense. We want to have more auto manufacturing here, and we're seeing it," Greer told CNBC, citing some moves by automakers to open new assembly capacity in the U.S., including Toyota's expansion of a Texas plant to build trucks now assembled in Mexico. General Motors said it will incur some $1.5 billion in expenses this year in part to move some vehicle production to the U.S. In the past year, the Detroit automaker has disclosed plans to build two Chevrolet SUV models in the U.S. that it now produces in Mexico, starting in 2027.

"That's the outcome that (Trump) wants," Greer added. "I think also if we can have an arrangement with Mexico, with Canada, that we are trying to emphasize Canadian, Mexican, U.S. content in goods traded in North America, that's a good outcome because that helps get supply chains back here in North America."

The Auto Content Proposal

During bilateral USMCA talks with Mexico in May, USTR proposed requiring that 50% of the value of North American-built vehicles originate in the United States, a significant departure from current rules and a difficult adjustment for automakers with highly integrated regional supply chains. The proposal would require automakers to source more parts and components from the U.S., potentially increasing costs and disrupting established supply chains.

Year-End Goal

Mexico's new ambassador to the U.S., Roberto Lazzeri, said on Friday that Mexico was expecting to reach a new deal by the end of the year, and that he thinks the U.S. and Canada are aiming for the same goal. "Every moment that we're losing, I think we are losing competitiveness, market share and investment, so it's in the best interest of all three of us to get to a position of resolution soon," said Lazzeri, a former investment banker and finance ministry official. He added that Mexico shares the Trump administration's goal of bringing more manufacturing to North America, including to the U.S.

Tariff Setback for Canada

The talks come a day after the Trump administration announced new tariffs on nearly $20 billion worth of Canadian goods over Ottawa's tariffs on U.S. autos, steel, aluminum and dairy, as well as provincial alcohol bans. That move deepens a rift that has kept Canada largely sidelined in the USMCA negotiations, as Greer has said there has been little movement towards concessions.

Greer has lauded Mexico for its lack of retaliation to U.S. tariffs and "pragmatic" approach to negotiations that include working to align Mexico's export controls with those of the U.S., steps to protect intellectual property rights and moving to curb the export of avocados grown on illegally deforested land.

Autos and Economic Security

The talks in Mexico City will dig into technical details of U.S.-Mexico trade in autos, steel, aluminum, agriculture and labor, according to Greer's office. The discussions will also focus on "economic security," USTR's term for raising regional trade protections to keep China and other Asian countries from using Mexico and Canada to access the lucrative U.S. market on preferential terms.

China's growing footprint in Mexico's car market represents a potential irritant in the talks. Reuters on Monday reported that new distribution figures showed Chinese car sales rose 30% in the first half of 2026, despite 50% tariffs imposed in January, with Chinese brands raising their market share to 17% from 14% a year earlier. People familiar with the talks have said that the U.S. wants its North American partners to erect similar trade barriers to non-regional goods, including vehicles, auto parts, steel, aluminum and other components.

The USMCA negotiations are at a critical juncture, with the U.S. pushing for significant changes to the agreement while Canada remains sidelined by escalating tariff disputes. The talks with Mexico are focused on lowering the U.S. trade deficit, increasing domestic manufacturing, and raising regional trade barriers to keep out Chinese goods. The outcome of these negotiations will have far-reaching implications for North American trade and the global automotive industry. A failure to reach an agreement could lead to the eventual wind-down of USMCA, disrupting the $1.6 trillion in annual trade between the three countries. The year-end deadline set by Mexico adds urgency to the talks, but the path to a resolution remains uncertain. The coming months will be critical in determining the future of North American trade relations. For businesses and workers across the continent, the stakes could not be higher. The world is watching to see if the U.S., Mexico, and Canada can find common ground or if the region's economic integration will be undone by protectionist policies and escalating trade disputes. The outcome will shape the competitive landscape for years to come.