Closing the Agreement Gaps. is Mexico Ready?

The roller coaster mix-up continues! Mexico has only a few days left to see if the Trump administration will, again, punish our country for not doing enough to contain the drug trade into the United States. Mexico has been in a very difficult position with Donald Trump since his first term in 2017. But this time, President Claudia Sheinbaum has not made a formal visit to Washington to visit the White House and negotiate one-on-one to try to put a stop to the onslaught of threats and notifications from Trump’s cabinet members, some of whom are coming to Mexico City to establish a series of accords in preparation for the renegotiation of the USMCA Trade Agreement (T-MEC in Mexico). It's also unknown if Canada will be part of the new trade agreement given the antagonist stance and tariffs against them and Mexico. In either case, it will be very hard --- down to the numbers and security agreements --- to avoid a hard hit on our country in relation to, for example, auto parts and Mexican content in manufacturing plants for exports to the north. 

It seems apparent that the aerospace industry is being looked at, as well as the oil and gas sector, the latter of which is not yet included in the USMCA. The Trump administration will be fighting hard for changes or for penalties, given the insecurity and turmoil related to drug cartels now designated as terrorist organizations. The Chapo family and the capture of Ismael Zambada have put renewed pressure on Mexican authorities to do more to combat crime in various regions of Mexico, especially in the border states of Baja California and Tamaulipas. Trump’s governing style with tariffs as a means of pressure to get advantages for his country is becoming more problematic as time passes because they are pushing US consumer prices higher. The tariffs are a way of imposing taxes on goods from foreign countries by making them more expensive. The numbers also show that unemployment is rising. It'll get worse if you add the White House push to fire even more government workers. In addition, inflation won’t recede. The Federal Reserve just cut interest rates by 0.25% to try to leverage the current situation.

The Mexican economy continues to be a continuous issue with growing unemployment, despite continuing and stable amounts of foreign direct investment for the country. The outlook looks mixed for the rest of 2025, with GDP of near zero growth for the last quarter. The ongoing problems and scandals involving corrupt government officials and organized crime have put American authorities on the alert to avoid conflicts of interest with the war on drugs that the Trump administration has restarted. President Sheinbaum also has to tread lightly without risking a major political storm within her own party, MORENA. Whatever the case, 2026 is not looking rosy. Come November we will know how much we will be affected by tariffs or if they will be on pause for another three months. 

At the same time, two wars are creating a more united front for the European Union and NATO. This as the Ukraine-Russia war continues with Russian President Vladimir Putin rejecting peace plan efforts. On the contrary, he continues to bomb Kiev while also interfering with larger Europe via provocations from swarms of drones surrounding airports around The Netherlands, Denmark, Norway, and Poland. On the other front, the war in Gaza continues, negating the Two State Solution (Palestine) proposed by Qatar as negotiating intermediaries with Hamas. It's getting more complicated with time, and 90% of the United Nations have called for the arrest of Israeli Prime Minister Benjamin Netanyahu to stand trial at the ICC (International Criminal Court) in the Hague over claims of genocide in relation to the atrocities in Gaza. 

On the business front, the aerospace industry, now worth around US$8 billion, is critical for the United States and Mexico has technically qualified labor and engineers. Technical talent will be needed more than ever now that current policies in the United States call for the controversial deportation of illegal immigrants, rather than greet those individuals who have manufacturing experience and legalize their status. As much as 400,000 open factory jobs are available to fill in throughout the continental United States, and not even 5% of potential employees are being enrolled to work. The real epidemic is the lack of this type of talent to fulfill the Trump administration's agenda of getting American manufacturing back to its golden days of success. This will only worsen from now on. This is a huge opportunity for Mexico if and only if President Sheinbaum is able to successfully negotiate in the coming months the new terms of the USMCA. In time, Mexico seems poised for major political changes given the party in power is facing several corruption scandals, which will give the opposition a lead into the 2027 elections. This will also allow for more negotiating space starting now and into 2026. Inflation might continue to spike around 4 to 4.5% and employment might tick up higher if all agreements come out in line with the Trump administration's demands. The so-called nearshoring talk was halted after many layoffs and FDI cautiously remains steady despite skepticism of tariffs and threats of military intervention from Trump to halt the fentanyl trade that has been blamed for many deaths in the United States over the last 10 years. The ramp-up of this focused war on drugs is on watch with the U.S. Navy stationed in the Caribbean right off the coast of Venezuela, targeting any ferry or vessel suspected of trafficking drugs. A total of three boats have been attacked so far but, the real pressure is on President Nicolas Maduro of Venezuela, who is accused of being the kingpin of drug cartel Tren de Aragua, He is also accused of involvement in other corruption scandals over the last 12 years, including rigging the last presidential election of 2024 where by many accounts he lost that election but still remains in power by authoritarian force. 

Finally, geopolitical forces are spurring China, Russia, and India to join economic forces against the United States. China, which has been able to flood the electric and hybrid car market throughout the world, is fighting back against tariffs, sanctions, and other economic conditions while still negotiating with the Trump administration in parallel. India is another player that, just like China, is on the brink of becoming a superpower, with top talent and a record number of engineers accommodated through the H1-B Visa Program. It has been sanctioned for buying oil from Russia, indirectly helping to finance the war machine President Putin has been waging with Ukraine for the last three years and almost nine months. Last May, Trump also tried to make Ukraine pay back the US$300 billion it owes the United States. At the same time, Putin is not accepting Trump’s plans for peace and, to the contrary, has continued to bomb and attack Kiev to this day. This may end in a hard negotiation while more US economic sanctions are put in place by Congress before the end of 2025.

All these variables are key to dissipating much of the ongoing economic turmoil we are experiencing right now in Mexico. We will soon find out how this plays out, and if we, as a country, are able to come to terms with closing the gaps with North America.