After Canada Impasse, Mexico Quietly Left Washington Empty Handed, But Reiterates Section 232 Tariff Goals.

Mexico’s top trade diplomat, Marcelo Ebrard, was in Washington for several days last week [from Aug. 24 to Aug. 26] but quietly left empty handed on Wednesday.

Ebrard’s trip followed the now infamous Canada trade impasse. Despite that very public blow up in negotiations, Mexico’s president Claudia Sheinbaum said last weekend, prior to Ebrard’s visit, that she was “optimistic” of a deal and reiterated that Mexico’s goal is also to lower the Section 232 tariffs on steel, aluminum and automotive. Just like Canada.

The concern for many in the U.S. was if Mexico would get a similar tariff reprieve offered to the Canadians. USTR has long labeled Mexico as the easier trading partner, while Canada has decisively been labeled the more belligerent, with Trump calling them “nasty” – a term he has never used to describe the Mexican side. 

Mexico was the biggest violator of the steel and aluminum 232 investigations. The U.S. should not give them any real relief on steel or on aluminum and should not allow these metals tariffs to be used again as bargaining chips, let alone give up U.S. content requirements, adjusted only in June. American aluminum manufacturers have spoken out on this issue. They say it is absolutely critical that Washington protect the downstream aluminum extrusion industry, which is where 97% of the jobs and the defense industrial base applications reside.

But for now, the Washington trip seems to have produced no tangible results for Mexico. Ebrard said talks were going “poco a poco” – little by little. His messaging on Thursday from Mexico City was less optimistic than Sheinbaum’s from earlier in the week, suggesting Washington trade negotiators are still watching the dust settle on Canada, and deciding what to do about the 232 protective tariff regime for its next-door neighbors.

Ebrard said on Thursday that he continues to propose that the tariff on Mexican-made vehicles fall below 15%, arguing that Mexico deserves better treatment than Japan and South Korea because Mexico-made vehicles contain more U.S. content. This speaks to the difficulties of changing the 232 tariffs country-by-country; there is always another top trading partner who will have a reason, often quite rational sounding, to get identical treatment. The Section 232 metals tariffs, for example, were imposed after Department of Commerce investigations found that import dependence was an economic security matter. Those tariffs should not be used as leveraging tools to convince a trading partner to buy more Boeings or lower taxes on Big Tech, for example. The 232 protected industries are capital intensive industries with long time horizons. Here today, gone tomorrow tariffs will not unleash corporate investors’ animal spirits.

Ebrard also confirmed upon his return home that Mexico wants lower steel tariffs and the removal of the new, 10% Section 301 tariffs imposed on July 24.

Worth noting, Economic Secretary Ebrard is not asking for Canada-equivalent steel and aluminum treatment. Instead he frames Mexico’s case for a 232 reprieve around its deeper U.S. content. On the manufacturing side of the North America trade bloc, Mexico understands well its role in the “Fortress North America” narrative as an industrial hub for the region. This strategic positioning matters for downstream aluminum producers and middle-class automotive workers competing directly with lower-cost Mexican production.

For Mexico, the strategic goal could be to keep presenting as the open-minded, less belligerent neighbor while convincing Washington that Mexican manufacturing is really domestic North American manufacturing. Like Canada, they will want Washington to focus more on North America than the U.S. itself. Mexico’s main selling point is manufacturing. If they are successful at equating North American manufacturing as not much different than U.S. manufacturing, then capital shifts south again and gets the security of producing for the U.S. at preferential tariff rates while benefiting greatly from Mexico’s labor-cost advantage. This would be to the detriment of some U.S. investment and labor markets.

As far as the dramatic August trade talks go, Sheinbaum’s optimism was “all for naught,” as the British might say. Mexico’s president was confident of some sort of agreement last week. If there is one, there has not been a whisper about it down in Mexico. After the Canadian imbroglio, that silence is more meaningful than it otherwise would be. Washington apparently wasn’t prepared to simply transfer the abandoned Canadian concessions over to Mexico; a good sign. For now, Fortress North America remains a working hypothesis, rather than the preferred policy architecture for the three countries.

Mexico has yet to rally to Canada’s side. They are pressing ahead bilaterally while seeking the same relief. That leaves open the possibility of the trilateral USMCA turning into two, separate bilateral agreements instead, which CPA supports.