Trump Likely to Fully Renegotiate USMCA: Former Mexican Trade Officials

Messmacher, speaking at a Nov. 6 event hosted by the Peterson Institute for International Economics, began his remarks by asking if there would be a "USMCA 2.0" and said his impression is that "yes, we will see that." He said the new agreement will depend "to a very large extent" on views in the U.S. because Mexico is beholden to U.S. interests and is "very keen on maintaining the relationship with the U.S. in an important way."

Mexico is "already sending very strong signals of commitment" that it "wants to go fully with the U.S., almost whatever it takes," Messmacher said. This sentiment contrasts "a lot" with Canadian attitudes, he said, whose position "has been more distant in that respect." He said that this difference in positions creates "more doubts" as to whether the new agreement will be "one, three-party agreement, or three bilateral agreements."

He clarified that this line of thinking was "purely speculative," but said that "clearly" the higher level of tensions between Canada and the U.S. when compared to Mexico and the U.S. indicates that "the probability that you have bilateral agreements, I think, is higher than it was before." The prospect of two individual trade agreements has been endorsed by the Coalition for a Prosperous America (see 2511070005).

Messmacher said that his views on the USMCA renegotiation were confirmed after listening to Mexican Under Secretary for Trade Luis Gutierrez, because they are "very similar to what he actually said." The Mexican government would like to negotiate to the current "status quo," Messmacher said, saying that if the current tariff levels stay where they are, "then perhaps it's not a bad deal for Mexico."

Messmacher laid out areas where the Mexican government is likely to offer concessions to the Trump administration, including on rules of origin: "What this would suggest to me is that Mexico, probably in whatever new agreement we have, will be willing to have much stronger restrictions on rules of origin." Other areas include reducing unfair competition in Mexico's labor sector, something that he said President Claudia Sheinbaum "will be very sympathetic to," and possibly "some symbolic" commitments to further tackling the illicit drug trade in Mexico.

Whatever agreement emerges from the negotiations will almost certainly include higher tariffs and tighter rules of origin, Messmacher said. He suggested that the Mexican government "compensate" for the higher trade uncertainty by becoming an "indispensable partner" to the U.S. in key areas of importance to the Trump administration, such as security and migration.

Overall, however, Messmacher was bullish on Mexico's ability to negotiate an agreement in its favor, pointing to Mexico's importance in the "geopolitical competition with China." He said that "views in the U.S. administration seem to be that Mexico does matter." He also highlighted Sheinbaum's ability as a negotiator and said that she and President Trump "seem to have established very good relationships." All told, he said, Mexico "seems to be having and maintaining a good working relationship with the U.S."

Alejandro Werner, a senior fellow at the Peterson Institute and a former official at the Ministry of Finance of Mexico, was less sanguine, saying that USMCA has "evolved from a happy marriage" to simply "living together" and referred to the negotiations as "couples therapy." He said that, in his analysis, "we have to be a little bit less gung-ho on having a treaty" at all.

The U.S. and Mexico are headed to a "much more amorphous reality, even if we have a treaty," he said, and that reality means "some lower tariffs, preferential access to both markets, some protection of investment, but a lot of uncertainty that things can change with a treaty or without a treaty."

Werner said that if the U.S. moves toward "three-letter bilateral treaties," then it might have to go through Congress, because "that will be a new treaty," and "just avoiding that will have a lot of value."

Mexico has adopted a negotiation strategy that Werner called "Si Señor," meaning that whatever the U.S. demanded, Mexico would "have to accommodate." He said that Mexico does not "have a lot of negotiation power," due to the size of its economy tied to exports to the U.S. The Mexican government is adopting "the right strategy" through appeasement, he said, and focusing on "what it wants to get out of this negotiation," which is to maintain its trade relationship with the U.S.

Werner said that "in very general terms," the U.S. objectives are to "align Mexico's migration and security, fentanyl policies to U.S. interests," and to "extend U.S. protectionism to North America." Mexico's main objective is to maintain its development strategy by "basically being a manufacturing platform with significant number of free trade agreements," and access to the U.S. market, he said. It must accomplish its objectives while also minimizing the perception of "intrusion by the U.S. in domestic affairs," he said.

The most important element for Mexico, Werner said, is to "maintain the zero tariffs for USMCA-compliant goods, and to "achieve an agreement on the auto sector that is better than the agreements in the auto sector" that have been signed with other countries, such as the EU and Japan.