Editor’s Note: No cause for celebration
by Andrew Law.
Did Mexico dodge Trump’s tariffs? President Claudia Sheinbaum says yes. She told supporters this week that USMCA survived, that Mexico’s economy is strong, and that they should celebrate.
Mexico may have avoided new tariffs. But unlike various peer nations, it was already under heavy ones. Trump’s 25% tariff on non-USMCA auto imports kicked in Wednesday night. That hits over 40% of Mexico’s car exports. Steel and aluminum tariffs remain. And there’s the 25% general tariff on non-USMCA goods - about half of Mexico’s exports. These are already having impacts.
According to Sheinbaum, this week’s events shows the US “respects” Mexico and has a “good relationship” with it. If this is good, I’d hate to see bad.
Meanwhile, Bloomberg details falling business confidence, capital investment, and monthly remittances. BNP Paribas now projects 0% growth for Mexico this year - worse than the Treasury’s already downgraded 1.5% forecast. Two hundred thousand jobs were lost in February. Mexico’s own INEGI data on cyclical trends suggests the country may already be in recession.
It seems new Canadian PM Mark Carney didn’t get the memo that USMCA survived. On Thursday, he called the era of US-anchored global trade and deepening North American integration “over.”
Sheinbaum’s outward confidence may be domestic posturing. She also pushed a boosted “Plan Mexico.” That at least signals awareness that change is needed. But the details of that plan focus mostly on domestic self-sufficiency.
That is a questionable approach right now. Sheinbaum faces an inherited record deficit and ballooning debt. Most of the 2025 budget goes to debt payments and bailing out PEMEX. There’s little resource allocated to drive growth or productivity.
The risk is that Mexico’s government gets so caught up selling its own spin that it loses sight of reality. Economy Secretary Marcelo Ebrard is right to push to preserve the USMCA. Mexico will always be tied to the US. It needs to trade on the best terms it can with it, always. As David Agren explains in his column this week, it’s inconceivable for most in Mexico to be without a US free trade agreement anymore.
But the US under Trump is finished with global free trade. He’s been saying this consistently since the campaign, and it’s time we all heard him. Even if these tariffs are eventually rescinded or watered down, the damage is done. Trump’s direction of travel is clear. This won’t be the last erratic and damaging thing he does in the next four years. We aren’t even four months into his term.
Even a renegotiated USMCA will likely offer little stability. At best, Trump wants Mexico to be a fenced-off cheap labour pool for the US for whatever sectors don’t re-shore. Many companies will continue playing it safe - better to move operations to the US and avoid the risk. Various analysts told Mexico’s Proceso this week that nearshoring is, for all intents and purposes, dead.
That’s precisely why Mexico should be devoting as many resources as possible now to diversifying trade. America might be done with free trade, but there’s no reason everyone else has to be. And Mexico should do this alongside Canada. Both countries have long neglected each other in pursuit of currying favour with Washington. Doug Ford, premier of Canada’s largest province, wants to continue doing so. He’s wrong. So is anyone in Mexico who thinks similarly.
From London, where I’m writing this, Sheinbaum’s situation is all too familiar. British PM Keir Starmer also tried selling tariffs as a political win this week. He too is stuck with a debt mess he didn’t create, in a country psychologically tied to the US. Maybe the two should compare notes. They could commiserate over being trapped between political reality and economic necessity - both trying to hold things together while avoiding the hard truth that the old system is gone.
That could be the first step toward a long and difficult, but ultimately necessary, trade recalibration. Canada could help. Maybe even the EU. Think of it as a revived NAFTA - a North Atlantic Free Trade Agreement. A few months ago, I’d have balked at writing this. It would have felt like an absurd idea. Today, it seems a lot less absurd than believing this US administration “respects” Mexico, or that the answer to Mexico’s problems is a mirage of self-sufficiency.
And, hell, it’s gotta be better than Mexico pivoting to Russia.