Canada and Mexico, the two biggest trading partners of the United States, recently held a significant summit. What made this meeting particularly noteworthy? The U.S. was conspicuously absent, following a tumultuous eight months marked by chaotic trade negotiations and persistent tariff threats. Prime Minister Mark Carney of Canada and President Claudia Sheinbaum of Mexico convened to discuss crucial matters, with a primary focus on strengthening trade relations and exploring investment opportunities in vital sectors such as mining, agriculture, and natural gas. A key objective for both leaders is to safeguard their existing free trade partnership with the United States, a pact that has, until now, cushioned their economies from the full impact of President Trump’s tariffs. This summit comes just after the three nations initiated public consultations on the U.S.-Mexico-Canada Free Trade Agreement (USMCA), signaling the initial phase of a formal review. Beyond economic discussions, Mr. Carney and Ms. Sheinbaum are also anticipated to share strategies on navigating the unpredictable trade policies of the Trump administration, whose approach has varied between Canada and Mexico despite their profound economic interdependence with their southern neighbor.
The Trump administration has previously imposed steep tariffs on some Canadian exports, making Canada one of the few countries, alongside China, to retaliate against U.S. trade measures.
Unlike Britain, the European Union, and Japan, Canada and Mexico have so far been unsuccessful in securing a distinct U.S. trade deal. However, Mexico has received multiple extensions on trade discussions, allowing it to largely avoid the harshest tariffs and benefit from the terms of the USMCA, which was initially negotiated during Mr. Trump’s first term. This has prompted Canada and Mexico to actively revitalize their bilateral relationship. In August, a Canadian delegation traveled to Mexico City for preliminary talks, with Canada’s foreign minister, Anita Anand, describing it as an “all-hands-on-deck approach.”
Understanding the Mexico-Canada Relationship
Despite being partners in a shared trade agreement with the United States, Mexico and Canada have historically maintained somewhat distant economic and cultural ties. Last year, Mexico accounted for only one percent of Canadian exports, while Canada represented approximately three percent of Mexico’s export market. Geographically separated by the United States, both countries traditionally prioritized trade with their massive neighbor over fostering stronger direct connections.
Within Canada, particularly in Ontario, there has been some skepticism towards Mexico. This sentiment intensified as Ontario’s automotive industry witnessed a decline, with many carmakers relocating or expanding operations in Mexico and the southern U.S. Prime Minister Carney’s visit arrives at a challenging period for Canada-Mexico relations. The previous Canadian government, led by Justin Trudeau, upset Mexico by reinstating visa requirements for Mexican visitors in early 2024. This measure aimed to curb asylum claims in Canada and address U.S. concerns that Mexico was being used as a transit point to enter the United States.
Following Mr. Trump’s election in November, some Canadian politicians even floated the idea of excluding Mexico from the three-nation trade agreement.
The existing North American trade deal offers Mexico and Canada a comparatively advantageous position, as nearly all goods traded under the USMCA are exempt from the U.S. tariffs applied to their non-pact exports. However, separate global tariffs remain in effect for sectors like auto, steel, and aluminum.
What are the leaders hoping to achieve?
Both Canada and Mexico are keen to lessen their trade dependence on the United States. Daniel Trefler, a trade economist at the University of Toronto who has advised the Canadian government, observed, “When the U.S. treats its partners like adversaries, its partners start acting like allies.” However, Professor Trefler maintains cautious expectations for the immediate economic impact of the Carney-Sheinbaum meeting, suggesting it’s unlikely to fundamentally transform the North American economic landscape.
Industries in both nations have ambitious export goals. Mexico aims to boost its food exports to Canada, which currently relies heavily on the U.S. for winter produce. It also seeks increased investment from Canadian businesses.
Conversely, Canada is looking to expand its agricultural exports to Mexico and hopes Mexico will pivot from U.S. imports to Canadian natural gas. Sebastián Vallejo Vera, a political scientist at Western University, suggests that Ms. Sheinbaum might offer Mr. Carney valuable insights on navigating an adversarial U.S. administration. “The relationship between Mexico and America has been more fraught and for longer than the relationship between Canada and America,” Professor Vallejo Vera noted. The leaders may also seek to build support from influential political and economic entities beyond the White House, including major corporations with cross-border ties and U.S. politicians dedicated to preserving regional trade stability.
What are the potential challenges and risks?
Even if Mexico and Canada successfully coordinate a strategy to maintain the trade deal, they must carefully avoid any perception of ganging up on the United States, which could further inflame tensions. Moreover, the “Trump factor” looms large. “There’s a lot of uncertainty when it comes to Trump and his trade policy in general,” Professor Vallejo Vera stated. “I don’t think anybody’s very certain on what his next move is going to be.”