President Donald Trump announced on Friday that the United States is beginning work on a brand-new trade deal with Mexico, describing it as “a much better deal for the United States.” The statement came during an impromptu press gaggle at Andrews Air Force Base near Washington, just hours after 50% tariffs on some Canadian products took effect following the collapse of US-Canada trade talks.
A Fresh Bilateral Approach
“We’re also starting on a new deal with Mexico, a much better deal for the United States,” Trump told reporters. He did not offer a timeline or specific terms but signaled that Washington wanted to move beyond the expired trilateral USMCA framework, which collapsed on July 1 when the administration declined to extend it.
US Trade Representative Jamison Greer had said earlier in the week that negotiations with Mexican authorities on relocating manufacturing from Asia to North America were “constructive.” Washington has pressed Mexico on supply-chain security, migration enforcement and drug trafficking as leverage points in bilateral talks.
Canada Tensions Loom Over NAFTA Region
The announcement came against the backdrop of a sharp breakdown in US-Canada negotiations. Trump imposed 50% duties on some $20 billion worth of Canadian autos, alcohol, dairy and furniture under Section 338 of the Tariff Act of 1930, a Depression-era statute invoked for the first time.
Bloomberg reported that Canada’s demand for truck-related tariff relief had been the sticking point that derailed the deal at the last minute. The USMCA, which replaced NAFTA in 2020, is now in limbo across all three member countries, with separate bilateral tracks replacing what had been a trilateral pact.
Trade Policy Implications
Mexico’s Sheinbaum government has been under pressure from Washington on multiple fronts, including water-sharing agreements and drug trafficking, but has recently imposed tariffs on Chinese imports to address US concerns about Mexico serving as a backdoor for Chinese goods. The new bilateral deal would likely focus on manufacturing reshoring and tighter rules of origin for autos and electronics.
Market watchers note that the US average tariff rate on Mexican goods remains elevated, and the absence of a comprehensive framework leaves businesses on both sides of the border operating under a patchwork of executive orders and temporary exemptions.
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