National Interest

by Maria Fernanda Bozmoski and Enrique Millán-Mejía

    The scheduled review of the North American trade deal is a chance to bolster US economic security and prosperity.

    Trade is, as they say, having a moment in North America. Days after Mexico’s decision to impose tariffs on numerous Chinese imports, the Office of the US Trade Representative (USTR) launched the public consultation ahead of the US-Mexico-Canada (USMCA) agreement’s first joint review in 2026. The regional trade landscape is rapidly shifting and Washington has an opportunity to seize the short-to medium-term renegotiation process of the USMCA to secure America’s long-term economic stability. The country cannot afford to miss this window amid the current economic convergence between Mexico City and Washington.

    USMCA entered into force in 2020, in the middle of the COVID-19 pandemic-related disruptions. In 2022, trade among its members surpassed $1.5 trillion in combined exports and imports. This renewed trade pact, considered the best trade agreement and the fastest one negotiated by the United States, has deepened the interdependence of the three economies. More importantly, the agreement has also created a virtuous cycle of interconnection among supply chains, fostering competitiveness and economic security for all parties to the pact.

    In this sense, by imposing tariffs on Chinese goods, Mexico is signaling a willingness to deepen integration with the United States and anchor its economy within North America’s supply chains. This is welcome news for Washington. While some might view this decision as mere protectionism, the leaders of Mexico and the United States are framing it as an economic alignment and an opportunity to accelerate relocation of strategic supply chains near the US market.

    The Mexican government has proposed a comprehensive package of higher import levies—covering over 1,400 tariff lines, including apparel, textiles and footwear—from countries with which Mexico does not have a free-trade agreement. The People’s Republic of China, here, is the main target. Key moves include raising the tariff on passenger vehicles and many auto parts from approximately 20 to 50 percent (the WTO ceiling), as well as new and raised duties of roughly 10–50 percent across other products and categories.

    The package is part of the 2026 budget initiative and still requires congressional approval, which will likely be secured in a legislative body dominated by the president’s coalition. But it sends a clear signal of where Mexico is headed in terms of trade and investment rationale, justified by:

    1) Protect domestic industry and jobs. Officials (Economy Minister Marcelo Ebrard and President Sheinbaum) frame the measures as protecting Mexican manufacturing and preserving jobs in sectors exposed to lower-priced imports. The government has explicitly linked the measures to a broader industrial strategy (sometimes discussed as “Plan Mexico”) to promote domestic production.

    2) Respond to perceived unfair pricing that has led to a surge in imports. Authorities argue some imports are being sold “below reference prices” (a concern often associated with dumping or massively subsidized exports). Tariffs are presented as a means to an end to address that competitive pressure.

    3) Geopolitical and trade-policy alignments. The move occurs amid US pressure on partners to limit certain economic ties with China, following US tariff moves that affect North American supply chains. Mexican officials insist that the decision is a matter of domestic policy. Still, analysts view it as both a geopolitical signal and an attempt to protect Mexico’s privileged access to the US market.

    Considering that the sunset review of the USMCA has technically begun, why does this timing—ahead of the open period for consultations by the USTR—matter  While the consultation may sound merely procedural, the stakes are high. Investment is a significant part of it. The logic is that Mexico’s tariffs make it more attractive for companies to relocate production away from China. However, the tariffs are merely a temporary Band-Aid. They can protect specific sectors but create tradeoffs, including higher consumer costs, supply-chain cost increases and potential retaliation. Expect short-run protection but uncertain medium-term gains.

    Businesses today continue to face lengthy and delayed regulatory bottlenecks, as well as legal uncertainty due to unstable rule of law procedures and excessive red tape. A modernized USMCA can change this. Increased transparency and harmonized standards across borders are the minimum requirements that should be met for the next chapter of the USMCA. These steps would strengthen investor confidence and make North America the first choice for manufacturers considering new facilities.

    Additionally, the USTR consultation is seeking strategies to strengthen North American competitiveness against non-market practices and dumping by countries such as China. Here, the United States should double down on the Competitiveness Committee and pursue joint strategies with Mexico, Canada and even smaller but high-potential countries in Central America and the Caribbean, such as Costa Rica, Panama and the Dominican Republic, in areas including semiconductors, aerospace, critical minerals, agribusiness and clean energy.

    The USMCA review should secure America’s economic future through a strong, competitive North America. By embracing Mexico’s alignment, improving the investment climate and locking in strategies for economic security—including relying on more Western Hemisphere countries—Washington can turn the USMCA into the centerpiece of a North American strategy that advances “America First” without isolation.

    The USMCA review is also an important moment for updating the rules of origin in the North American free-trade region, specifically for those industries that still rely on third-country origin inputs for transforming goods. Other measures include adopting US standards for technical frameworks, including electronic and electric goods, pharmaceuticals, textiles and transportation equipment, among other products. Investment protection clauses for energy evergreen investments are also under consideration, as well as measures to protect labor and environmental rules that could create unfair trade among partners.

    America’s prosperity has always been linked to its neighbors. America First is not America alone. The 2026 review is a once-in-a-lifetime opportunity to ensure that USMCA remains a strong trade pact and a robust contributor to US economic security in an era of global competition.