Canada’s rupture with Washington may have created an unexpected opening south of the U.S. border. Kenneth Smith Ramos, Mexico’s former chief technical negotiator during the original CUSMA negotiations, says the Trump administration could now push aggressively for a political and commercial breakthrough with Mexico while Ottawa remains on the sidelines.
Smith Ramos expects Washington could seek a framework agreement with Mexico before the end of 2026, potentially postponing the most difficult disputes until 2027. That would not formally eject Canada from the continental trade pact, but it could reshape the negotiating landscape at a particularly difficult moment. Canada suspended its U.S. trade talks on August 21, new American tariffs followed, and Ottawa is preparing matching countermeasures. Meanwhile, Mexico already has another negotiating round with Washington scheduled for September.
Mexico Suddenly Has Washington’s Full Attention
The United States and Mexico were negotiating long before the latest Canada-U.S. rupture. U.S. Trade Representative Jamieson Greer met Mexican President Claudia Sheinbaum during a third bilateral negotiating round in Mexico City on July 23. Their agenda ranged across agriculture, labour and electronic payments to steel, aluminum, automobiles and economic security. Greer and Mexican Economy Secretary Marcelo Ebrard directed their teams to meet again in Washington in September. That gives the two governments an active negotiating track just as Canada’s has gone quiet.
There is an enormous commercial relationship behind those meetings. U.S. goods and services trade with Mexico reached an estimated US$964.1 billion in 2025, according to USTR, compared with US$872.3 billion between the United States and Canada. Washington also recorded a US$197-billion goods deficit with Mexico. Those numbers make Mexico too important for the Trump administration to ignore, while also giving Washington plenty of issues it wants changed. Smith Ramos believes the political incentive for a visible agreement has now increased.
A Mexico Deal Would Not Automatically Push Canada Out of CUSMA
The phrase “deal without Ottawa” can sound more dramatic than the legal reality. Washington declined on July 1 to extend CUSMA in its current form, but the agreement did not disappear. USTR explicitly said the pact remains in force. Under CUSMA’s review provisions, failure to obtain unanimous agreement on an extension triggers annual reviews during the remaining term. Unless the countries later extend the agreement or a government formally withdraws, the existing pact can continue toward its scheduled 2036 expiration.
CUSMA also allows a country to withdraw with six months’ written notice, while the agreement can remain in effect among the remaining parties. Nothing announced so far amounts to such a withdrawal. A U.S.-Mexico framework could instead sit beside CUSMA and settle bilateral disputes before wider negotiations resume. That possibility was hardly unimaginable in Ottawa: Canada-U.S. Trade Minister Dominic LeBlanc said in June that he expected bilateral arrangements between Canada and the United States and between Mexico and the United States “adjacent” to the trilateral framework.
Canada’s Breakdown Has Made the Stakes Much More Immediate
Canada’s negotiations with Washington collapsed on August 21 after weeks of efforts to reach a broader tariff arrangement. Prime Minister Mark Carney said progress had been made but described changes in the proposed U.S. terms as unfair and uneconomic, saying they raised questions about the reliability of any agreement. He ordered Canadian negotiators back to Ottawa. Washington has disputed Canada’s version of how the talks unravelled, with Greer arguing publicly that Canada sought additional concessions after the two sides had made substantial progress.
The consequences moved quickly from negotiating rooms to customs duties. The United States imposed a 50 per cent tariff on approximately C$27.6 billion of Canadian goods effective August 22. Canada subsequently announced dollar-for-dollar, rate-for-rate countermeasures covering C$27.6 billion of American imports. The Canadian tariffs, ranging from 15 to 50 per cent depending on the product, are scheduled to begin September 8. Ottawa also announced C$7.5 billion in new and enhanced support for workers and businesses affected by the trade fight.
Mexico Has Reasons to Deal — but Not to Celebrate Canada’s Problems
Mexico could gain short-term negotiating attention from Canada’s absence, but Mexican officials are publicly resisting the idea that Ottawa’s troubles represent a victory for Mexico City. Ebrard said the Canada-U.S. dispute does not favour Mexico and argued that North America ultimately needs deeper integration. Sheinbaum has similarly chosen cautious language when discussing the breakdown, reflecting Mexico’s need to preserve its own negotiations with the Trump administration without appearing to capitalize openly on Canada’s difficulties.
That caution makes economic sense. Canada and Mexico have spent years building their own relationship inside the larger North American market. Two-way merchandise trade between the countries approached C$62 billion in 2025, while Canada-Mexico goods and services trade has risen substantially compared with the period before CUSMA entered into force. The two governments also launched a Comprehensive Strategic Partnership in 2025 and have continued pursuing investment and trade initiatives. Mexico therefore has an incentive to secure favourable treatment from Washington, but weakening the broader North American trading system carries costs of its own.
The Auto Industry Shows Why Three Countries Are Hard to Separate
Automobiles illustrate the limits of treating North America as three independent trading relationships. CUSMA’s rules require passenger vehicles and light trucks to meet a 75 per cent regional-value-content threshold to satisfy a key origin requirement. Components and production can move through Canada, Mexico and the United States before a finished vehicle reaches a dealership. Decisions affecting one leg of the manufacturing system can therefore change sourcing calculations and costs throughout the continent.
Washington itself has acknowledged that some CUSMA issues are inherently more difficult to solve bilaterally. USTR has said matters including rules of origin, critical minerals and economic-security alignment may require trilateral solutions. Autos are already on the U.S.-Mexico negotiating agenda, alongside steel and aluminum. That means a bilateral framework could establish political commitments or resolve Mexico-specific disputes, but it would be considerably harder to rewrite every continental supply-chain rule without eventually bringing Canada back to the table. For manufacturers planning factories and sourcing contracts years ahead, the distinction matters.
Ottawa’s Bigger Risk Is Isolation at the Bargaining Table
The most significant danger for Canada may therefore be diplomatic rather than immediate legal exclusion. If Washington and Mexico announce a framework first, the Trump administration could arrive at future Canadian talks with a working template for what it considers acceptable. Mexico could receive certainty in selected sectors while Canadian exporters remain exposed to additional tariffs. Even without changing CUSMA itself, that sequence could alter bargaining leverage and make Ottawa the last major North American partner still seeking terms with Washington.
That possibility fits Smith Ramos’s warning that the United States could seek a politically useful “win” with Mexico after its failure to reach one with Canada. USTR has already indicated that it wants to determine which CUSMA problems can be handled bilaterally and which require three-country negotiations. From Canada’s perspective, the challenge would be preventing separate talks from turning into a divide-and-negotiate strategy. From Mexico’s perspective, rejecting progress merely to preserve a united front would also be difficult when hundreds of billions of dollars in bilateral commerce are at stake.
September Could Reveal Whether the Split Is Temporary or Structural
Several near-term events should show whether North American trade diplomacy is simply moving through parallel tracks or beginning a more consequential fragmentation. Canada’s new counter-tariffs are scheduled to take effect September 8. The United States and Mexico, meanwhile, have committed to a fourth bilateral negotiating round in Washington during September. Smith Ramos believes a U.S.-Mexico framework could emerge before the end of the year, although no such agreement has been formally announced.
Even a framework would probably not settle everything. Smith Ramos expects politically sensitive disputes, including possible U.S. demands affecting Mexican agricultural exports, could carry into 2027. CUSMA would also remain the legal foundation for continental trade unless governments take additional steps under the agreement. The central question is therefore less whether Trump can literally replace CUSMA with a Mexico-only deal overnight, and more whether Washington can use bilateral breakthroughs to remake the negotiating order. For Canada, being outside the room while that precedent is established could prove increasingly uncomfortable.
