Trump & Sheinbaum find it takes two to tango in the delicate USMCA dance
US President Donald Trump gesturing during a signing this week in Washington, DC. Image credit: Sipa US / Alamy.
Since the start of the second Trump administration this January, relations between Mexico and the United States have been active, tense, volatile but overall polite. Despite the US administrations’ tough talk on immigration and trade - including the imposition of some tariffs as in the case of steel and aluminum - and the fact that American unilateral military action in Mexican territory against the cartels still remains a possibility, Mr. Trump has maintained a somewhat restrained demeanor with his Mexican counterpart, President Claudia Sheinbaum.
After a telephone call on March 6, both leaders agreed for a second time to a truce on trade tariffs until April 2 for goods imported to the US under the United States, Mexico and Canada Agreement (USMCA). More notable perhaps, Mr. Trump emphasized his respect for Ms. Sheinbaum and noted that relations are moving along albeit the difficult context. The tone certainly contrasts with that used by the US president with Canada, his other North American partner. As of now, Trump still asserts that Canada should become the 51st state, a notion that not only infuriates Canadians but baffles many Americans.
President Sheinbaum’s diplomatic skills are being recognized at home and abroad. She has played her cards well. She has shown restraint in responding to provocations that are largely symbolic, like renaming the Gulf of Mexico as the Gulf of America. But more importantly, she has shown willingness to strengthen cooperation on the thorny issues of migration and security. On the economic front, the President has put together a thoughtful defense of the North American trade relationship. She has so far avoided retaliatory tariffs while also signaling openness to align Mexico’s trade policy with that of the United States with respect to China. These actions prompted a recent Washington Post article to bestow Sheinbaum with the title of “the world’s leading Trump whisperer.”
Looking beyond these events, the weight of key structural restrictions for both leaders should not be overlooked. On the Mexican side, the economy is showing clear signs of slowing down. Mexico’s central bank and other reputed analysts, both at home and abroad, now place growth estimates closer to zero than the 2.3% maintained by the government. That the 2026 review of USMCA has already turned into a de facto renegotiation adds to the uncertainty Sheinbaum currently faces due to the immediate effects created by trade tariffs.
If there is one thing that can ruin Sheinbaum’s overall plans and tank the economy, it is precisely a strong trade confrontation with the United States and losing the trade agreement. Mexico has become the United States top trading partner with bilateral commerce reaching an estimated USD $840 billion last year. Around 80% of Mexican exports go to the United Sates, and roughly half of all foreign direct investment comes from American companies.
On the US side, Mr. Trump is facing uneasy markets because of overall trade policy and perhaps even more so with respect to its Mexico policy, given the considerable integration of supply chains that exists between the two countries. As of mid-March, the S&P 500 was down more than 9% from its all-time high reached in February. Americans might feel comfortable with a careful use of tariffs, especially if they are based on reciprocity. But they also fear outright trade wars that can easily turn into an economic recession.
Full fledge trade negotiations between the two governments - and presumably Canada - are not likely to start until May. That’s when relevant US agencies will have reported to the President their recommendations on the America First Trade Policy issued the first day of his second administration. We can expect that a fair level of uncertainty and volatility will continue over the course of the year and into mid-2006, when the USMCA could have concluded and when the US midterm elections will be right around the corner.
Mexico’s careful diplomatic steps over the course of the last few months seems to prove the old saying that “it takes two to tango.” Rather than overreacting to a hasty Mr. Trump, Ms. Sheinbaum has been able to open a multidimensional negotiation on all key fronts of the relationship: trade, security and immigration. She has a fair chance of succeeding and reaching some form of accommodation. It is also true, however, that keeping alive the idea of an economically integrated North America with a trade agreement as backbone is very much still at risk. Mr. Trump transformational objectives should not be underestimated. In the end, he will have be convinced that this idea is in the best interest of the United States, both economically and geopolitically. From this optic also it will “take two to tango.”
Editor’s Note: Mr. Gutiérrez served as Mexico’s Ambassador to the United States and in that capacity played a prominent role in the negotiation of the USMCA.