North America’s trade negotiations are moving at two very different speeds. While Washington and Mexico City continue working toward a new understanding on tariffs, manufacturing and market access, Canada remains outside their bilateral negotiating process, with its own formal trade talks with the United States suspended.
The divide is becoming increasingly important for industries that depend on all three countries working together. Cars assembled in Mexico contain American and Canadian components. Agricultural products, machinery and industrial materials cross borders as part of long-established supply chains. Yet the governments responsible for those relationships are pursuing different diplomatic paths.
The Canada-United States-Mexico Agreement remains in force, and Canada retains its place in the treaty’s formal review process. The immediate concern is whether the United States and Mexico could establish important negotiating positions before Ottawa returns to direct formal talks with Washington.
Washington and Mexico Have Built Their Own Negotiating Track
The United States and Mexico began their latest series of bilateral trade negotiations in Mexico City on May 28 and 29, 2026. Another round followed in Washington in June, and a third took place in Mexico City in July. U.S. Trade Representative Jamieson Greer and Mexican Economy Secretary Marcelo Ebrard have led discussions aimed at resolving disputes that could reshape how businesses operate under the North American trade agreement.
The July meetings also included Mexican President Claudia Sheinbaum, demonstrating the political importance both governments attach to the negotiations. Their agenda extended well beyond conventional tariff reductions, covering automobiles, steel, aluminum, agricultural trade, labour standards, economic security and electronic payments.
For manufacturers operating on both sides of the border, these discussions have practical consequences. A change in automotive content requirements could alter where companies purchase components, while tariff relief could affect whether new production remains economically attractive. Washington wants stronger American manufacturing and more secure supply chains. Mexico is seeking continued access to its largest export market while protecting its industrial base. Canada, although central to those same supply chains, has not participated in these bilateral negotiating rounds.
A Delayed Fourth Round Has Not Stopped the Discussions
After their third round in July, American and Mexican officials announced plans to meet again in Washington during September. That fourth round was subsequently postponed because of scheduling conflicts, according to Mexico’s deputy economy minister for foreign trade, Luis Rosendo Gutiérrez. Speaking in September, Gutiérrez indicated that October was a possibility, while emphasizing that technical coordination with American counterparts was continuing daily.
The complexity of the negotiations helps explain why progress has been uneven. According to Gutiérrez, the number of issues under discussion had expanded from 54 to nearly 90, encompassing subjects such as digital platform regulation and industrial policy. Mexico has also been seeking relief from American tariffs on steel, aluminum and automobiles.
There were further signs of engagement on October 1, when Ebrard met Greer on the sidelines of the G20 trade ministers’ meeting in Milwaukee. Mexico’s Economy Ministry described the encounter as productive, and Ebrard suggested the governments were moving closer on several issues. However, neither side announced a completed agreement. The distinction matters: diplomatic momentum does not necessarily mean a deal is imminent, particularly when the negotiating agenda continues to expand.
Canada Suspended Its Talks After a Breakdown With Washington
Canada’s position became more difficult on August 21, when Prime Minister Mark Carney announced that his government was suspending formal trade negotiations with the United States and directing its negotiators to return to Ottawa. Carney said the discussions had made some progress but that last-minute changes to American proposals were unacceptable from Canada’s economic perspective.
Ottawa had entered the negotiations seeking to preserve tariff-free access for most Canadian exports, reduce duties on strategically important industries and establish more predictable conditions for businesses. Carney maintained that Canada could not accept an agreement at any price, particularly one that compromised its economic independence or weakened the country’s long-term industrial prospects.
The suspension came immediately before additional American tariffs were scheduled to take effect. Washington proceeded with 50% duties on approximately $27.6 billion worth of specified Canadian goods, substantially increasing pressure on affected exporters. For businesses already managing the costs of existing steel, aluminum and automotive tariffs, the breakdown created another layer of uncertainty.
The crucial distinction is that Canada suspended its separate formal negotiations with Washington. It was not expelled from the three-country trade agreement, nor did its suspension automatically end all diplomatic communication with American officials.
The North American Trade Agreement Has Not Been Cancelled
The continuing disagreement has created confusion about the future of the Canada-United States-Mexico Agreement, known as CUSMA in Canada and USMCA in the United States. The agreement entered into force on July 1, 2020, replacing the earlier North American Free Trade Agreement and establishing rules governing a deeply integrated continental marketplace.
Its first scheduled six-year joint review took place on July 1, 2026, with representatives from all three countries participating. Washington declined to approve an extension for another 16-year term. That decision was significant, but it did not terminate the agreement. Under its existing provisions, the treaty remains in force until July 2036 unless its status changes through the procedures established in the agreement.
Because the three governments did not agree to extend the treaty, annual joint reviews are now required. The United States has already begun gathering public input for the next review, with written submissions due January 12, 2027.
For businesses, this means existing treaty provisions continue to matter even as governments negotiate possible changes. Canada’s absence from current U.S.-Mexico bilateral sessions should therefore not be confused with losing its legal standing as a full participant in the trilateral trade framework.
New Auto Rules Could Put Canadian Manufacturing at Risk
Automobiles have become one of the most contentious subjects in the negotiations. Under existing USMCA rules, vehicles generally need 75% North American regional value content to qualify for preferential tariff treatment. The agreement also contains labour-value requirements intended to ensure that a substantial share of vehicle production occurs in higher-wage facilities.
In May, Reuters reported that American negotiators had proposed increasing the regional content requirement to 82%, while introducing a separate requirement that at least 50% of a vehicle’s value come specifically from the United States. The proposal was reported by people familiar with the negotiations and has not been adopted as a new treaty rule.
Such a change could have major consequences for automakers accustomed to treating the continent as a shared production base. A vehicle may contain an engine manufactured in the United States, components from Canadian suppliers and final assembly completed in Mexico. Existing rules recognize qualified production across the region, but a much stricter U.S.-specific threshold could encourage companies to shift purchasing and investment decisions.
Canadian manufacturers are particularly concerned about any negotiating framework that diminishes the value of Canadian-made components. Mexico has also resisted the proposed American content requirements, making automotive rules a central obstacle to any broader agreement.
Tariff Relief Remains the Biggest Prize for Mexico
Mexico’s government has made reducing U.S. tariffs on steel, aluminum and automobiles a priority in its discussions with Washington. Those industries are central to the country’s manufacturing economy, particularly in industrial regions that produce vehicles and components for American consumers.
For Mexican exporters, securing more favourable tariff treatment could help restore competitiveness and give companies greater confidence when planning investments. However, tariff reductions remain an objective of the negotiations rather than a confirmed result. American officials have continued to emphasize domestic production, trade imbalances and economic security, suggesting that meaningful concessions could depend on Mexico accepting other changes.
Canada is facing a different set of pressures. The United States introduced 50% tariffs on specified Canadian products on August 22 under Section 338 of the Tariff Act of 1930. Ottawa responded on September 8 with retaliatory tariffs of 15%, 25% and 50% on selected American products covering approximately $27.6 billion in imports.
These measures do not mean every product crossing the border faces a 50% tariff. Different industries and products are covered by different rules and exemptions. Nevertheless, the resulting uncertainty affects exporters, importers and businesses deciding where to source materials or expand production. The longer the dispute continues, the harder it becomes for companies to plan confidently.
Energy Is Emerging as Another Major Bargaining Issue
The scope of the U.S.-Mexico negotiations appears to be widening beyond manufacturing. In October, the Financial Times reported that President Donald Trump had pressed Mexican President Claudia Sheinbaum to support closer partnerships between American and Mexican energy companies. The discussions reportedly included the possibility of Mexico increasing purchases of American natural gas as part of a broader effort to address trade imbalances.
Energy is an especially sensitive subject in Mexico, where state-owned enterprises such as Pemex and the Federal Electricity Commission occupy important positions in the economy. Expanding commercial opportunities for American firms could therefore raise questions about domestic political priorities as well as foreign investment.
Mexico already depends heavily on natural gas from the United States. That relationship helps supply electricity generation and industrial operations, connecting energy security directly to the competitiveness of factories producing goods for North American markets.
Still, discussions about additional energy purchases or corporate partnerships should not be mistaken for binding commitments. No finalized energy arrangement has been publicly established through the reported conversations. Their importance lies in demonstrating how Washington may seek concessions across several industries while Mexico negotiates for greater predictability in tariff policy.
The Economic Pressure Is Already Visible in the Auto Industry
Trade uncertainty is not simply a problem for diplomats. It has begun appearing in manufacturing statistics. Figures released by Mexico’s national statistics agency showed that vehicle exports fell 12% in September compared with the same month a year earlier, while production also declined sharply. Analysts linked the weakness to American tariff policies and the uncertainty surrounding future market access.
Mexican domestic vehicle sales increased during the month, providing some support for manufacturers, but the American market remains essential. Mexico’s automotive industry supplies a substantial share of vehicles sold in the United States, making changes in trade conditions especially consequential for production schedules and investment decisions.
Canada faces similar exposure because its automotive industry is closely connected to American assembly plants and suppliers. Canadian government figures indicate that approximately 90% of Canadian automotive goods exports went to the United States in 2025. Parts and components often move across the border multiple times before a completed vehicle reaches a dealership.
That interconnected system means changes negotiated between Washington and Mexico may also influence Canadian employment and investment. A purchasing decision made by an automaker in Michigan or Mexico could affect a parts supplier in Ontario. The consequences of trade negotiations can therefore spread far beyond the governments participating directly.
Mexico Could Gain Influence Before Canada Returns to the Table
The greatest concern for Ottawa is not necessarily that Mexico will conclude an agreement without Canada. It is that Washington and Mexico could develop a shared negotiating position on important issues before Canada resumes its own formal discussions with the United States.
An understanding on automotive content, tariff concessions or investment restrictions could influence the terms subsequently presented to Canadian officials. Even without a completed bilateral deal, months of direct engagement allow negotiators to identify potential compromises, establish priorities and determine which demands might be politically acceptable.
There are important legal limits to this process. The USMCA cannot be formally amended by Washington and Mexico alone. Article 34.3 requires the parties to agree in writing to amendments, with the necessary approval procedures completed by all three countries.
Nevertheless, bilateral negotiations can shape the environment in which trilateral decisions are eventually made. Mexico’s access to the negotiating process gives it an opportunity to defend its interests in real time. Canada’s suspended discussions place greater importance on diplomatic communication, industry advocacy and its participation in the formal treaty-review mechanism. For Canadian businesses, the challenge is ensuring their interests remain visible before positions become harder to change.
Ottawa Still Has a Path Back, but the Clock Is Moving
Despite the suspension of formal talks, communications between Ottawa and Washington have not stopped. On October 8, U.S. Trade Representative Jamieson Greer said American officials continued speaking frequently with Canadian counterparts, including at senior levels. He also indicated that Washington was maintaining its negotiating position and remained willing to engage.
Those remarks suggest that the dispute has not eliminated the possibility of renewed formal negotiations, although neither side has announced a breakthrough. Canada’s government continues to face the difficult task of balancing tariff relief against protections for industries that depend heavily on the American market.
Meanwhile, Ottawa is attempting to reduce its longer-term economic vulnerability through stronger commercial relationships elsewhere. On October 6, Carney announced plans to visit Türkiye later in the month to advance cooperation in trade, investment, energy and other strategic sectors. Such initiatives may create additional opportunities, but replacing the scale and proximity of the American market would be extraordinarily difficult.
The next developments to watch are whether Canada and the United States formally resume negotiations, whether Washington and Mexico announce their delayed fourth round, and whether any proposed tariff concessions become actual agreements.
For now, North America’s trade relationship remains connected by a common treaty but divided by unequal negotiating momentum. Mexico continues to engage Washington directly, while Canada works to protect its place in an economic partnership that neither geography nor politics can easily unravel.
