The US now trades 2x more with Mexico than China

If there's one country that has most needed to tread carefully with Washington over the last year, it's been Mexico.

Over 80% of Mexican exports head north to the US (roughly 83% as of 2024-25, per INEGI), making Latin America's second-largest economy uniquely vulnerable to trade shocks such as the imposition of arbitrary tariffs like those seen throughout 2025 and 2026.

The Mexican government, led by President Claudia Sheinbaum, has accordingly kept the stability and sanctity of the US-Mexico trade relationship, the world's largest, as a chief priority of foreign economic policy.

Throughout 2025, Mexico held its position as the top US trade partner, widening the gap with China, as reflected in the above chart from the Bureau of Economic Analysis.

USMCA Renegotiations

Scheduled renegotiations of the United States—Mexico—Canada Agreement (USMCA), to renew the trilateral agreement for another sixteen years, are ongoing.

For Mexico, the priority is to keep Washington happy and avoid derailing the trade and investment flows that bind the two countries together. The over $70B auto industry, the country's top manufacturing sector, is of particular importance, as are agricultural and energy links.

One thing that may be helping Mexico in its negotiations is the third party to the talks, Canada. The US–Canada relationship, which is at an all-time low, has been marked by bitter rows since the second Donald Trump presidency began in January 2025.

Part of this is economic: Ottawa is also incredibly dependent on the US, and is being wracked by the constant tariffs. The other part involves Trump's repeated public musings that Canada should be made into the 51st US state, which have understandably infuriated the Canadian government.

As the US has insisted on separate negotiations with the two countries to improve its bargaining position, Mexico's quieter role as the “easy partner” compared to Canada is almost certainly helping it to win over US Trade Representative Jamie Greer, and maybe even Trump himself.

The China Factor

Washington has repeatedly indicated that it seeks to maintain some level of tariffs on Canadian and Mexican goods. If Mexico seeks to negotiate these tariffs down, China may ironically be the solution.

From the start of USMCA negotiations in the late 2010s, one of Washington's priorities has been to block out Chinese imports. Mexico, which has long competed with China as a fellow developing industrial power with large exports to the US, today also imports significant manufactured products from the East Asian giant.

In order to solidify a renewal of the USMCA and maybe even bring down US tariffs for good, Mexico is likely to offer to join the US in its trade barriers against Chinese imports, particularly of sensitive goods like electric vehicles or industrial goods.

This would knock out two birds with one stone: facilitate trade talks with Washington while also protecting domestic Mexican industry from cheaper Chinese competition.

Source: Bureau of Economic Analysis (BEA)