Mexico, Canada Strengthen Trade Amid US Tariff Pressure

Mexico and Canada are advancing a joint action plan to deepen economic integration, reduce regulatory barriers and expand bilateral trade as US tariff policies and geopolitical tensions reshape North American supply chains. The initiative, linked to the review of the USMCA, targets sectors including manufacturing, critical minerals, infrastructure and technology, affecting exporters, investors and industrial producers while supporting trade diversification and regional competitiveness.

Mexico’s Minister of Economy Marcelo Ebrard and Canada’s Minister of Intergovernmental Affairs Dominic LeBlanc said the new joint action between Mexico and Canada, which includes elements related to the review of the USMCA, will be presented to their leaders in the 1H26 and aims to strengthen business cooperation in strategic sectors.

"We need to expand the presence of Mexican exports and investors outside of Mexico, in countries like Canada. And that is a necessity. It is a new tune. We are not in our comfort zone like in the past," said Ebrard during the plenary session that marked the launch of the Canadian trade mission to Mexico in Mexico City.

The trade mission brought together 240 organizations and 370 business leaders and scheduled more than 1,000 business meetings in Mexico City, Monterrey, and Guadalajara. LeBlanc described the delegation as the largest Canadian business mission to Mexico to date. Both officials emphasized the importance of expanding trade flows between the two countries and strengthening cooperation in key industries. Priority sectors identified include port infrastructure, information technology, critical minerals, logistics, drones, artificial intelligence, aerospace, vaccines, pharmaceuticals, mining, robotics, and emerging technologies.

LeBlanc said the bilateral partnership would support industries, exporters, and investors, noting that USMCA has helped position Mexico and Canada as key partners within North America’s integrated economy. "We have seen how the economic relationship between Canada and Mexico has multiplied twelvefold in 30 years. So, when the North American Free Trade Agreement came into effect, we grew the relationship between Canada and Mexico proportionally more than we have with our middle partner, the United States," he said.

Ebrard described Canada as a reliable partner with which Mexico has developed strong value chain integration and longstanding cooperation. He said the action plan will strengthen business alliances and expand bilateral coordination.

Tourism and security cooperation were also highlighted as areas of growing engagement. According to LeBlanc, more than 3 million Canadians are expected to visit Mexico in 2026, representing about 7% of Canada’s population, with numbers continuing to rise. He also emphasized the need to strengthen security coordination and military cooperation between the two countries.

“As our two countries seek to further diversify their trade, there is no better time than now to forge new partnerships, following in the footsteps of companies such as McCain Foods, Grupo Bimbo and Bombardier Recreational Products, to name just a few,” LeBlanc said.

Distancing From the United States

The Mexico-Canada initiative emerges amid shifting trade dynamics in North America, as US policy has introduced commercial uncertainty for both countries.

Since the re-election of Donald Trump in January 2025, relations between the United States and Canada have weakened due to protectionist policies, tariff measures, and political tensions. Trump’s “America First” agenda, threats to annex Canada as the “51st state,” and duties on key Canadian exports triggered a rise in Canadian nationalism and prompted a strategic policy shift in Ottawa.

In early 2025, Washington imposed tariffs on Canadian steel, aluminum and automotive products. Steel duties reached 35%, while other sectors faced similar measures. Although about 85% of Canadian exports remained tariff-free under the USMCA, the targeted tariffs disrupted cross-border supply chains, particularly in automotive manufacturing and raw materials, increasing unemployment and raising living costs.

Prime Minister Mark Carney responded by pursuing a strategy to reduce Canada’s reliance on the United States, strengthening trade ties with Europe and Indo-Pacific partners, expanding infrastructure and pipeline investments, and reinforcing commitments within NATO. More recently, Donald Trump threatened a 100% tariff on Canadian goods in response to Ottawa’s trade engagement with China. 

Mexico has also faced growing pressure from US trade measures. In February 2025, the United States imposed a 25% tariff on imports from Mexico and Canada, citing concerns over migration and fentanyl trafficking. While USMCA-compliant goods were later exempted, non-certified products remained subject to duties, affecting exports and supply chains.

Additional tariffs followed, including a 25% duty on steel and aluminum imports in March, later increased to 50% in June, contributing to a 60% drop in Mexican steel exports to the United States by April. Mexican officials, including Ebrard, sought exemptions, while President Claudia Sheinbaum emphasized protecting employment and ensuring fair trade conditions.

Further measures targeted automotive imports and components, while a proposed 30% tariff on additional Mexican goods was temporarily suspended to allow negotiations over regulatory and market barriers. New duties on medium- and heavy-duty vehicles took effect in November 2025, and disputes over water obligations and potential tariffs linked to Mexico’s trade with Cuba added uncertainty. 

Despite these tensions, the three governments continued negotiations to manage trade and economic relations.

Diverging Trade Outcomes Under USMCA

Despite operating under USMCA, Mexico and Canada recorded contrasting trade results with the United States in 2025, highlighting structural differences and explaining the countries’ push to diversify its trade partnerships.

Between January and November, US imports from Mexico rose 6% year over year to US$492.5 billion, while imports from Canada declined 7% to US$351.2 billion. This occurred even though Mexico faced higher effective tariff rates, estimated at 3.8% to 4.7%, compared with 1.8% to 3.7% for Canada. Both countries increased compliance with USMCA rules as trade pressures intensified.

The divergence reflects their different roles in US supply chains. Mexico’s export base is centered on large-scale manufacturing, including automotive and advanced-technology goods, which supported growth despite currency appreciation and global volatility. Canada’s trade relationship relies more heavily on energy and raw materials, leaving exports more exposed to commodity price shifts and regulatory changes. 

Policy approaches also differed. The administration of Sheinbaum prioritized technical coordination with Washington, while the government of Carney adopted a more confrontational stance, contributing to different trade outcomes.