Mexico Pushing for Section 232 Exemptions in USMCA

Three people discussed the USMCA review during a panel at the Georgetown International Trade Update on March 13; the panel was conducted under the Chatham House rule, and the panelists agreed to these descriptors of their affiliations with an International Trade Today reporter.

Some of the shortcomings the panelist pointed to were the need to address investment surges from non-market economies in North America, and the effects of overcapacity, Mexican labor law enforcement, worsening business climate and customs facilitation, Canada's digital trade policies and "how to address the high trade deficit in goods with our partners."

A panelist representing the Mexican private sector agreed that some of these issues were legitimate improvements, such as tackling the business climate and reducing inputs from outside the region, as long as it's done in a nuanced way.

He said, "Mexico has suffered deeply from unfair trade practices from our Asian partners both in the Mexican market and in export markets."

He said Mexico didn't want to admit China to the World Trade Organization, but was pressured by the U.S.

"Of course, we want to strengthen regional supply chains. Of course, we want to bring more economic activity into this region," he said, but, he added, "we need to be very careful." He said some electronic inputs are concentrated in Asia, and some other inputs are available in North America, but not at the scale needed for the level of production. So there needs to be a transition period as rules of origin become tighter.

"If we do it wrong, then we risk, at the end of the day, being less competitive with Europe and Asia, that will still have access to those inputs," he said.

He questioned the stance that the fact that the U.S. buys more goods from Mexico than vice versa means that USMCA is not working well.

According to the Office of the USTR, the goods trade deficit with Mexico was almost $197 billion in 2025, 14.8% higher than in 2024. Exports to Mexico grew more than 1% from 2024, however, and reached $338 billion.

He said that the administration shouldn't look at a trade deficit with Mexico the same way it does with Japan or Europe. No country's exports have more U.S. content than Mexico's. He gave the example of a Honda built in Mexico or one built in Japan, or a VW built in Mexico vs. one built in Germany. Those Mexican cars contain U.S. parts; the ones from overseas don't.

"One element that we have failed to explain to stakeholders in D.C. is this symbiotic relationship between Mexico and the U.S. in industrial goods," he said. When Mexico's factory sector grows, the U.S. grows. When Mexico's factory sector is shrinking, so does the U.S. factory sector.

"They think one job [going] to Mexico is one less job in the U.S.," he said. "Nothing could be more wrong than that."

The Mexican panelist said that currently about 70% of Mexican imports are entering the U.S. duty-free, but 30%, in autos, steel, aluminum, copper and others are facing Section 232 duties.

He said the Mexican private sector's view is that Mexico can agree on some changes to USMCA, including on rules of origin, but that "all goods that comply with the rules we agree to should be duty-free." He said the U.S. and the Canadian private sectors agree.

A Canadian panelist was not that direct about Canadian stakeholders expecting an exemption to Section 232 duties as part of the USMCA review, but did say that Canadian firms need to know no more tariffs are coming. (There are incomplete Section 232 investigations that could affect Canada, and Canada is a target of a Section 301 investigation on its alleged lack of enforcement of a ban on the import of goods made with forced labor.)

He said the Canadian business community would prefer that the U.S. decline to renew USMCA for 16 years on July 1, if the negotiations at that point have not resolved whether Canada will be subject to more tariffs.

If one of the countries does not agree to extend USMCA on July 1, then it still will be in force another 10 years, and the three countries will revisit the issue each year.

The Canadian panelist said the auto sector, its rules of origin and digital trade issues are most technically challenging, but the lack of tariff stability is the biggest challenge.

He said Canadian stakeholders want to protect the integrated supply chains in North America, preserve market access to the U.S. and "avoid unnecessary concessions."

The two foreign panelists talked about USTR's approach that Mexico and Canada should address irritants before the official review launches. The Mexican panelist said the U.S. presented 54 asks, and Mexico had 12 asks of the U.S.

The Canadian panelist said Canada's government is wary of this approach. "They don’t want to feel as if they’ve given something away before they get to the renegotiation," he said.

Still, he expressed confidence issues are resolvable, but said it would be better done at a negotiating table than via complaints to reporters.

"So much of this has been debated publicly, so little discussed at the negotiating table," he said.