Economics: The USMCA—complex, recurring negotiations amid recent sensitive trade imbalances
On July 1, Mexico, the U.S., and Canada announced that the USMCA will remain in effect through 2036 (rather than through 2042, as Mexico and Canada had proposed), with annual reviews beginning on that date and formally starting on July 20. Talks are expected to be nearly continuous, covering rules of origin, regional content, steel, automobiles, energy, Chinese investment, agriculture, and border security, among other issues.
Mexico is seeking to avoid new unilateral U.S. measures, resolve steel tariffs, preserve automotive competitiveness, define economic security frameworks, and attract investment in semiconductors, computing, electronics, and pharmaceuticals. The U.S., for its part, is seeking to reduce its trade deficit, attract manufacturing and jobs, tighten rules of origin, and limit indirect benefits to third countries, against a backdrop of sectoral protectionism ahead of the November elections.
The most sensitive sectors (or chapters of the Harmonized System) are machinery and computing (84), automobiles and auto parts (87), electrical equipment (85), vegetables (07), and fruit (08), which together accounted for 77% of Mexican exports to the U.S. and 114% of Mexico's trade surplus with that country in 2025 (other HS chapters recorded deficits). Between 2024 and 2025, exports of machinery and computing equipment rose a notable 57%, while the automotive and agricultural sectors declined. Mexico's overall trade surplus with the U.S. grew 22% over that period and 90% in machinery and computing, although it fell in automotive, beverages, and agricultural products. In January-April 2026, the overall surplus totaled $35.8 billion (+50% year over year), with increases in machinery, electrical equipment, beverages, and fruit, but deficits in automotive and vegetables.
In May 2026, according to the Census Bureau, Mexican exports to the U.S. reached a record $54 billion, and the U.S. trade deficit with Mexico hit $21 billion, equivalent to 20% of the total U.S. deficit with the world—a factor that adds significant sensitivity to the upcoming negotiations.
Turning to last week's indicators, private consumption grew 2.1% year over year in April, driven solely by spending on imported goods, while consumption of both domestic goods and services remained stagnant. Industrial activity, meanwhile, was flat year over year through May and remains in negative territory for the January-May cumulative period, with manufacturing showing no rebound despite positive export figures. Lastly, consumer inflation in June fell significantly to 3.37% annually, driven by a sharp decline in the non-core component and only a modest improvement in the core component, which remains slightly above 4%.
Now read on...
Register to sample a report