Trade Talks with Mexico Resume Amid New Tariffs on Canada

By the Editorial Team · Wednesday, July 22, 2026

U.S. and Mexican officials began negotiations in Mexico City to revise the USMCA amid rising trade tensions and the exclusion of Canada following recent tariff disputes. The talks aim to address manufacturing reshoring, trade deficits, and economic security concerns to preserve North American trade relations before the agreement’s potential expiration.

U.S. and Mexican trade officials began a third round of bilateral negotiations on July 21 in Mexico City, aiming to revise aspects of the North American trade framework amid growing tensions with Canada. These discussions mark the first formal talks on changes to the United States-Mexico-Canada Agreement (USMCA) since the Trump administration declined to extend the pact on July 1, triggering a potential sunset clause that could dissolve the agreement within 10 years unless all three parties reach a consensus.

The current negotiations exclude Canada, which has largely been sidelined following the U.S. announcement of new tariffs on nearly $20 billion worth of Canadian goods. These tariffs target Canadian products in response to Ottawa’s duties on U.S. autos, steel, aluminum, dairy, and provincial alcohol restrictions, escalating trade disputes within the North American region.

U.S. Trade Representative Jamieson Greer, expected to join the negotiations on July 22, underscored the administration’s primary objectives: reducing trade deficits with Mexico and Canada and encouraging the reshoring of manufacturing jobs to the United States. According to data from the U.S. Census Bureau, the U.S. goods trade deficit with Mexico increased by 17% last year to $197 billion, while the deficit with Canada declined by 21% to $48.3 billion.

Greer highlighted recent moves by automakers such as Toyota and General Motors to expand or relocate production capacity to the United States as progress toward these goals. For example, GM announced plans to shift production of two Chevrolet SUV models currently made in Mexico to U.S. plants starting in 2027, with expected expenses of approximately $1.5 billion.

Among the contentious points in the talks is a U.S. proposal introduced during May’s discussions with Mexico to require that 50% of the value of North American-built vehicles originate in the United States—a significant increase from current standards that could disrupt existing supply chains.

Mexico’s new ambassador to the U.S., Roberto Lazzeri, conveyed optimism about reaching an agreement by year-end and said Mexico shares the Trump administration’s objective of increasing manufacturing within North America. Lazzeri cautioned, however, that delays risk losing competitiveness, market share, and investment.

The negotiations will delve into technical aspects of trade involving autos, steel, aluminum, agriculture, and labor, with a particular emphasis on “economic security.” This term refers to efforts to strengthen regional trade safeguards to prevent China and other Asian countries from exploiting Mexico and Canada as backdoors to the U.S. market under preferential terms. Chinese car sales in Mexico reportedly rose 30% in the first half of 2026 despite the imposition of 50% tariffs in January, a development that complicates discussions.

While the U.S. has praised Mexico for a “pragmatic” approach and its restraint from retaliating against U.S. tariffs, progress with Canada remains limited. The U.S. Chamber of Commerce has urged the preservation of USMCA’s trilateral structure, tariff-free trade, and enforcement mechanisms, emphasizing the importance of certainty for businesses involved in the $1.6 trillion North American trade network.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.