USMCA and its predecessor, the North American Free Trade Agreement, have defined North America's economy for 32 years, underpinning nearly $1.6 trillion in once duty-free regional trade, with Mexico and Canada sending the vast majority of their exports to the United States.
But U.S. President Donald Trump last year fundamentally altered the trade pact by imposing "Section 232" national security tariffs of 25% on autos and 50% on steel and aluminum from Mexico and Canada — duties from which they are now seeking relief.
Luis de la Calle, a former Mexican trade official, said that for an interim agreement with Mexico, "a good place to start is elimination of the 232 duties."
The relationship between Canadian and U.S. officials has been tense in recent months, with Trump announcing a 50% tariff on some $20 billion in Canadian goods, including beer, dairy and hockey sticks, this week to punish Ottawa for retaliating against Trump's autos and metals tariffs.
Greer was due to arrive in Mexico City later on Tuesday to join bilateral talks with Mexico on potential USMCA revisions. Canada has been excluded from the negotiations, raising the risk that it will be forced to accept terms agreed by Mexico.
The Trump administration is demanding that Mexico raise the level of regional content in North American-built cars to qualify for preferential trade access, part of an effort to incentivize more production in the U.S. and North America and restrict Chinese-origin content in vehicles.
While Mexico broadly agrees with these goals, it differs on how to achieve them and has first sought reductions in U.S. tariffs on autos, steel and aluminum.
Trump has been sharply critical of the U.S.-Mexico-Canada Agreement that he signed into force in 2020, often threatening to terminate the pact due to persistent U.S. trade deficits with Mexico and Canada.
On July 1, Trump chose not to renew the agreement, a decision that triggers a 10-year countdown to its expiration unless all three countries agree to renew it with changes.
Greer told senators that for Trump to agree to an interim trade deal with Mexico, some non-trade disputes may need to also be resolved, including U.S. demands that Mexico tighten border security and improve compliance with a 1944 Rio Grande River treaty to supply Texas farmers with irrigation water.
"The president is going to have a hard time agreeing to renewal or even revisions if Mexico isn't playing ball in all areas, and the water treaty is one of them," Greer said.
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