North America’s trade negotiations are taking two increasingly different paths. Mexico is pushing for a separate agreement with Washington that could reduce U.S. tariffs on automobiles, steel and aluminum before the November 3, 2026, midterm elections, while Canada’s negotiations have made limited progress.
Mexican President Claudia Sheinbaum confirmed on October 28 that discussions were advancing, although significant disagreements remain. The potential agreement could provide relief for Mexican manufacturers and influence how Washington approaches its broader trade relationship with Canada.
But the clock is ticking. With no formal deadline, no finalized agreement and unresolved disputes over industrial tariffs, Mexico’s negotiating strategy faces its own obstacles. For automakers operating across North America, the outcome could reshape investment decisions, production costs and the competitive balance between three closely connected economies.
Mexico Wants an Agreement Before Washington’s Political Landscape Changes
November 3 has emerged as an important political target for Mexican negotiators. The date marks the U.S. midterm elections, when President Donald Trump’s Republican Party will be fighting to retain control of Congress. Officials in Mexico and the United States have been exploring whether they can reach an interim bilateral agreement before that vote. Such an arrangement could reduce selected American tariffs while allowing negotiations over the broader United States-Mexico-Canada Agreement, known in Canada as CUSMA, to continue. Importantly, November 3 is not an official deadline, and negotiations would not automatically end if the date passes.
The urgency became clearer on October 28, when Sheinbaum acknowledged progress in discussions but stopped short of announcing a breakthrough. Reuters had reported in September that officials from both countries viewed an agreement before the elections as politically advantageous. For Mexico, securing tariff relief would help reassure businesses concerned about investment conditions and access to the American market. For Washington, an agreement could demonstrate progress on trade policy before voters cast their ballots. Yet both governments still face difficult decisions about what concessions they are prepared to make.
Automobile Tariffs Are at the Centre of Mexico’s Demands
Mexico’s automotive industry is a major priority in the negotiations because tariffs directly affect the economics of producing vehicles for American customers. The United States introduced a 25% national-security tariff on imported automobiles in 2025, although vehicles qualifying under CUSMA can receive special treatment. Under the applicable content-certification arrangements, the duty can be assessed on the non-U.S. portion of a qualifying vehicle rather than its entire value. Even with that adjustment, the tariff creates additional costs for manufacturers operating highly integrated North American production networks.
Mexican negotiators want a meaningful reduction in these duties. Earlier reporting indicated that some industry participants believed Washington might offer an arrangement involving a 15% vehicle tariff, potentially combined with additional recognition of American content. That possibility has not become a finalized agreement. The distinction matters because a lower effective tariff could make Mexican-built vehicles more competitive against imports from other countries. The United States has already negotiated lower automotive tariff arrangements with trading partners including Japan, South Korea and the European Union, adding pressure on Mexico to secure comparable treatment. However, any eventual agreement will depend on its precise terms, including which vehicles qualify and how their content is calculated.
Steel and Aluminum Tariffs Are Complicating the Automobile Deal
Although automobiles attract much of the attention, steel and aluminum have become major obstacles in Mexico’s negotiations with Washington. U.S. tariffs under Section 232 of the Trade Expansion Act impose duties of 50% on many imported steel and aluminum products, with different rates applying to certain manufactured derivatives. Mexico wants relief not only for basic metals but also for downstream products made from those materials. This is particularly important for manufacturers that depend on steel components, aluminum assemblies and other industrial inputs to produce vehicles, machinery and equipment for the American market.
The disagreement became public in October when Bloomberg reported that U.S. and Mexican negotiations had encountered an impasse over metal tariffs. According to people familiar with the discussions, Commerce Secretary Howard Lutnick had resisted Mexican demands for substantial reductions, and a counterproposal had failed to resolve key concerns. Mexican Economy Secretary Marcelo Ebrard disputed suggestions that negotiations had stalled, while Sheinbaum subsequently maintained that progress was continuing in areas of mutual interest. These competing accounts illustrate an important distinction: discussions can remain active even when negotiators are unable to settle their most difficult issues. Without meaningful concessions on metals, a comprehensive interim tariff arrangement may prove harder to achieve.
Washington Is Demanding More American Content in North American Vehicles
Tariff reductions are only one side of the negotiations. Washington is also seeking changes to the manufacturing requirements governing vehicles produced in North America. Under the current CUSMA framework, passenger vehicles and light trucks generally must meet a 75% regional value-content requirement to qualify under the agreement. Additional provisions require 40% to 45% of qualifying vehicle production value to come from workers earning at least US$16 per hour. These conditions were introduced to encourage regional manufacturing, protect employment and prevent companies from using North America simply as an assembly destination for imported components.
The Trump administration wants to go further. According to Reuters reporting on October 27, U.S. negotiators have demanded that North American-built vehicles contain 50% specifically American content, with proposed changes potentially raising the regional content requirement to 82% for certain U.S. trade benefits. These demands have not been finalized. Washington is also raising concerns about Chinese investment and the use of components sourced from outside the region. For Mexico, accepting stricter sourcing requirements could mean adjustments to existing supply contracts and manufacturing arrangements. Rejecting them, however, might limit the tariff concessions available. The central challenge is finding a compromise that increases American manufacturing content without undermining the competitiveness of the North American automotive industry.
Mexico’s Vehicle Production Numbers Explain the Urgency
Mexico has substantial economic exposure to the outcome of these negotiations. According to the country’s National Institute of Statistics and Geography, INEGI, Mexican factories produced 301,803 light vehicles in September 2026 and exported 277,369 during the month. Across the first nine months of the year, production reached approximately 2.95 million vehicles, while exports totalled about 2.53 million. The United States accounted for 76.4% of those vehicle exports. September’s export performance was particularly concerning, with shipments falling approximately 12% compared with the same month in 2025.
These figures demonstrate how deeply Mexico’s automotive manufacturing operations depend on access to American customers. The relationship also works in the opposite direction. U.S. Congressional Research Service data show that American imports from Mexico included approximately US$84.4 billion in motor vehicles and US$67.3 billion in motor vehicle parts in 2025. American manufacturers therefore have significant exposure to Mexican supply chains, even when final assembly takes place inside the United States. A change in tariffs can affect component costs, supplier contracts and decisions about future production. For Mexican manufacturing communities, the stakes extend beyond export statistics to factory employment, local suppliers and the businesses that serve automotive workers.
Canada’s Trade Negotiations Remain Active but Have Made Limited Progress
Canada’s position contrasts with Mexico’s continued pursuit of an interim bilateral agreement. Prime Minister Mark Carney suspended broader negotiations with Washington on August 21 after describing last-minute changes to proposed American terms as unfair and economically unacceptable. The disagreement contributed to a wider tariff confrontation, including American duties of 50% on various Canadian imports and Canadian retaliatory measures. Although discussions subsequently resumed, the two governments have struggled to reach a new arrangement. On October 28, a Canadian official told Reuters that progress remained limited, despite ongoing contact between representatives from both countries.
Carney acknowledged that Canada remained willing to conclude an agreement serving the interests of both economies, but said the necessary conditions had not yet emerged. American officials also confirmed continued discussions, including contacts involving Commerce Secretary Howard Lutnick, U.S. Trade Representative Jamieson Greer and Canadian trade representatives. The latest negotiations have concentrated on Section 232 duties affecting industries such as steel and automobiles. Canada’s approach reflects a broader concern about protecting domestic manufacturing and avoiding terms that could leave Canadian industries increasingly dependent on decisions made in Washington. Meanwhile, Mexico’s separate diplomatic efforts create the possibility that the two countries could secure different tariff arrangements despite sharing the same continental trade agreement.
Automakers Are Watching Both Borders as Investment Risks Grow
The uncertainty surrounding North American trade is becoming increasingly difficult for automobile manufacturers to ignore. At a Reuters automotive conference in Detroit on October 27, Jennifer Thomas, a senior executive at American Honda, warned that threatened increases in U.S. tariffs on Canadian automotive imports beginning January 1, 2027, could be catastrophic for the industry. She emphasized the importance of maintaining a functioning three-country trade agreement, arguing that North American manufacturing depends on integrated supply chains. Honda has also indicated that uncertainty surrounding CUSMA could influence whether it proceeds with another assembly plant in North America.
The implications are particularly significant for Ontario. Federal government data indicate that the province’s automotive manufacturing sector employs more than 95,000 workers and exported approximately C$60 billion in vehicles and parts to the United States in 2025. Those shipments represented roughly 96% of Ontario’s automotive exports. If Mexico secures lower tariffs while Canada continues facing higher duties, differences in market access could influence future investment decisions. However, companies cannot necessarily relocate production quickly or cheaply. Existing factories, supplier relationships, specialized equipment and skilled workforces all constrain those choices. For automakers, the preferred outcome may therefore be greater stability across all three countries rather than separate agreements that create new competitive imbalances.
A Separate Mexico-U.S. Agreement Would Not Replace CUSMA
Despite the bilateral negotiations, the existing North American trade agreement remains legally in force. The United States declined to extend CUSMA for another 16-year term during the agreement’s scheduled review on July 1, 2026. That decision did not terminate the treaty. Instead, the agreement remains in effect through July 2036, unless the countries agree on an extension or another action changes its status. The three governments are now required to conduct annual joint reviews until they agree to extend the agreement or its existing term expires. This process gives Washington additional opportunities to seek changes while maintaining the underlying trade framework.
A temporary agreement between Mexico and the United States would therefore represent a separate layer of trade policy rather than an automatic replacement for CUSMA. The distinction is important for Canadian manufacturers because tariff concessions negotiated specifically for Mexican goods would not necessarily apply to Canadian exports. It could also create complications for businesses producing vehicles with components sourced from all three countries. Mexico and Canada have both expressed support for maintaining the trilateral framework, even as their individual negotiations with Washington have developed differently. Ultimately, disputes involving automotive content, foreign investment, labour provisions and tariff treatment may require broader negotiations before manufacturers gain the long-term predictability they are seeking.
November 3 Could Pass Without a Deal, but Negotiations Would Continue
With the U.S. midterm elections approaching, the immediate question is whether Mexico and Washington can resolve enough outstanding issues to announce a credible interim agreement. Sheinbaum’s October 28 remarks suggested that discussions remained productive in certain areas, but they did not establish that an agreement was imminent. Earlier reporting from Bloomberg identified serious disagreements over metal tariffs, while Mexican officials continued to express optimism about reaching a compromise. Economy Secretary Marcelo Ebrard had also indicated on October 20 that Mexico wanted to complete the year’s review process before the end of 2026, demonstrating that the government’s negotiating horizon extends beyond election day.
For Canada, the situation presents both potential risks and opportunities. A Mexican agreement could increase pressure on Ottawa to secure comparable tariff relief, particularly if manufacturers begin evaluating the competitive advantages of operating on either side of the border. Conversely, the economic importance of integrated North American manufacturing could encourage Washington to pursue arrangements benefiting all three economies. Neither outcome is guaranteed. The developments worth watching are actual reductions in Section 232 tariffs, confirmed changes to automotive content requirements and any formal agreements issued by the governments involved. Until those details emerge, Mexico’s pursuit of a deal remains a significant diplomatic effort rather than a completed trade victory.
