Mexico, U.S. race to secure trade deal before midterm elections

Mexico and the U.S. are racing to secure a trade deal before the U.S. midterm elections in less than eight weeks, according to six sources familiar with the talks, with failed negotiations between Washington and Canada adding urgency.

The discussions centre on an interim agreement that could give Mexico relief from some U.S. tariffs in return for concessions on issues including automotive content and Chinese investment.

There is no formal deadline, but officials on both sides see a deal before the 3 November elections as politically useful. For U.S. President Donald Trump and Mexican President Claudia Sheinbaum, an agreement would allow both governments to claim progress amid domestic political pressure.

Mexico's Economy Ministry said there was no specific deadline but stressed its continued commitment to negotiations. The U.S. Trade Representative and the White House did not immediately respond to requests for comment.

Mexico chooses cooperation

The urgency in Mexico has grown since trade talks between the U.S. and Canada broke down last month, leaving the two long-time allies locked in a tariff dispute.

Washington on Tuesday banned imports of a wide range of Canadian alcohol, motorcycles and dairy products, while Ottawa has vowed to respond with matching tariffs.

For Mexico, the dispute has reinforced its strategy of avoiding confrontation with Washington and instead seeking concessions through cooperation.

More than 80 per cent of Mexico's exports go to the U.S.

The pace of the talks picked up this week, with U.S. Commerce Secretary Howard Lutnick holding a virtual meeting with Sheinbaum on Thursday to discuss trade.

The meeting came less than two weeks after Sheinbaum proposed legislation that would give Mexico new powers to review and block foreign acquisitions of Mexican companies.

The proposed system would be similar to investment-screening regimes in the U.S. and Canada and is widely seen as an attempt to address U.S. concerns over Chinese investment in Mexico.

Car tariffs remain a major obstacle

The talks are aimed at an interim bilateral deal while broader issues involving the three-country USMCA trade agreement are being worked out.

The pact was thrown into uncertainty in July when the U.S. declined to renew it for another 16 years. It remains in force, subject to annual review, but the Trump administration has used the process to press Canada and Mexico for further concessions.

One of the biggest sticking points is the so-called Section 232 tariffs on steel, aluminium, cars and auto parts.

Mexican and Canadian steel shipped to the U.S. faces a 50 per cent tariff under the national security measures, while vehicles face a 25 per cent duty.

Trump has agreed to lower auto tariffs with several other trading partners, including 15 per cent for Japan, the European Union and South Korea and 10 per cent for Britain.

That leaves some vehicles from those countries facing lower duties than cars imported from Mexico and Canada.

Several automakers believe Washington could offer Mexico a framework similar to the one discussed with Canada before those talks collapsed: a 15 per cent tariff on vehicle imports, with further reductions linked to U.S. content, potentially bringing the effective rate to around 7 per cent.

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