This summary of probable U.S. objectives is based on public statements by the principal U.S. negotiator, U.S. trade Representative Jamison Greer and other U.S. officials but may well be incomplete since the negotiations are confidential and U.S. positions are subject to change 2.
While the 2026 USMCA review is scheduled for July 1, working-level discussions between the United States and Mexico began in mid-March and ministerial-level negotiations are scheduled to begin toward the end of May. On the other hand, formal U.S.-Canada negotiations have not yet started, despite extensive positioning via social media.
Key issues for the United States will include changes in the USMCA rules of origin, particularly in the automotive sector, consistent with the extra-legal rules imposed on Mexico and Canada in 2025 designed to encourage auto and auto parts manufacturers (along with those in machinery and some other sectors) to manufacture more in the United States and less in Mexico and Canada, with reduced dependence on third country inputs. Such changes may simply mirror measures already imposed on Mexico and Canada that are inconsistent with the USMCA, such as 50% tariffs on steel, aluminum, copper, and related downstream products. Tariffs of 25% on autos and auto parts are likely to continue at some level, regardless of whether they comply with current rules of origin. A credit for U.S. content may still apply.
China will continue to overshadow the negotiations , as China’s growing global influence is viewed by many U.S. policymakers and members of Congress as an existential strategic challenge for the United States. Mexico is being asked to monitor Chinese investment in Mexico (current estimates of which range from less than $3 billion by the Mexican government to several times that by independent experts 3). The focus will be on sensitive sectors ranging from autos and auto parts to semiconductors, through a new Mexican investment screening mechanism. The United States will also demand controls on “transshipment,” an amorphous concept that focuses on such Chinese actions as shipping Chinese steel via Mexico to the United States to avoid U.S. tariffs. However, it may also affect Chinese production of goods in Mexico, such as laptop computers, where Chinese content remains substantial. U.S.-China friction puts Mexico in a difficult position. China is Mexico’s second largest trading partner. Under normal circumstances, Mexico would welcome greater Chinese investment, particularly as new investment from other sources has stalled. Mexico’s recent increase in tariffs on countries that do not have a free trade agreement with Mexico (China, but also South Korea and many countries in Southeast Asia), including 50% on autos, may have pleased Trump but generated strenuous objections from China 4.
Pressures exist in the United States, particularly among Democrats, to improve and expand protection of worker rights in Mexico (especially collective bargaining and recognition of independent unions), through the “rapid response mechanism” and otherwise. Strong enforcement of such Mexican obligations is an issue due to concerns about the well-being of Mexican manufacturing workers. But both Democrats and Republicans see better worker rights in Mexico that increase real wages as a means of eventually reducing the substantial disparities in hourly wages between Mexico and the United States. Stronger environmental protections will also be on the agenda, along with U.S. objections to Mexico’s USMCA-inconsistent reversion under Presidents Sheinbaum and Lopez Obrador to Mexico’s state-centered petroleum and electricity policies of the 1970s through the 1990s.
On the more positive side, cooperation seems likely on e-commerce, rare earth mineral development (more practical with Canada than Mexico) and possibly artificial intelligence. How far the United States wants to go on AI, beyond general platitudes, is uncertain. True cooperation on critical minerals would likely prove difficult unless and until the Sheinbaum administration opens lithium mining opportunities to the private sector, reversing the Lopez-Obrador decision four years ago to nationalize the deposits and put them under the authority of an inactive state-owned agency, Litomex 5.
Both the United States and Mexico also have an interest in strengthening regional supply chains, which in my view have been severely weakened by U.S. tariff policies.
Mexico’s key objectives can be summarized as “First, do no more harm.” Some 80% of Mexico’s exports go to the United States, most of those that meet current USMCA rules of origin, enter the United States duty-free. With other key exports, such as autos and auto parts, steel, aluminum, and copper, which are subject to 25%-50% tariffs, the hope is for better treatment. Eliminating the tariffs is likely off the table, but it may be possible to negotiate tariff rate quotas, whereby a volume of such goods enters the United States duty-free or at a low rate of duty (possibly 10%-15%); once that quota is filled the duties would revert to the current 25%-50% level. Relief is particularly critical for the auto and auto parts industry. At present, autos made in the European Union, Japan and South Korea enter the United States at 15%, while the same auto produced in Mexico could be dutiable at around 25% depending on its U.S. parts content. In my view neither the United States’ auto producers nor Mexico benefit.
Businesses across all three USMCA countries urgently need greater predictability and a more stable policy environment before they are willing to expand investment and hiring. Ideally, the USMCA review would provide clearer and more durable rules on tariffs, trade, and regional integration for at least the next several years. However, that outcome appears uncertain. The Trump administration’s “America First” trade policies have shifted repeatedly over the past 16 months, often with limited notice, making long-term planning increasingly difficult for companies operating across North America.Secondly, there is a strong possibility that the July 1 USMCA review will not result in agreement on a new text. Formal negotiations would be postponed until July 2027, but informal negotiations between the United States and Mexico would be likely to continue well into this fall, possibly including non-trade issues such as migration, drug violence, corrupt state officials, and border security. Finally, concerns regarding the weakening of the rule of law and institutional checks under Sheinbaum, López Obrador, and Morena have also had a chilling effect on some potential foreign investors.
- Will Clayton Fellow for Trade and International Economics, Claudio X. González Center for the United States and Mexico, Baker Institute for Public Policy at Rice University
- Greer’s objectives
- Chinese Investment in Mexico
- China protests Mexican tariffs
- Lithium nationalization
