What Happened

The U.S.-Mexico trade relationship is undergoing significant change. At the July 1 joint review of the United States-Mexico-Canada Agreement (USMCA), the Trump administration declined to renew the deal he negotiated in his first term, while Mexico and Canada said they wanted to continue it. The previous agreement stays in effect through 2036 but now faces annual reviews, and his administration has said it may reach an interim arrangement on some issues by year's end. [](#ngr-b196e239-9085-41c6-bef3-687c5521e0af)

Why Does it Matter to Me?

By June, 87 percent of U.S. imports from Mexico entered duty-free under USMCA, up from 46 percent in January 2025, as businesses moved to claim that status.Trump administration policies produced a reported 93.5 percent drop in migrant encounters at the southwest border from January through July, compared to the same period in 2024, and a Congressional Research Service (CRS) report updated Sept. 23 identifies Mexico as the primary source country for U.S.-bound synthetic drugs, including fentanyl.

Both Sides, Now

The Trump administration has used trade pressure and tariffs to push Mexico on drug trafficking and supply chain concerns tied to China. The legal tools available for that pressure have narrowed: the Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act in February, and Section 122 tariffs expired in July after a court ruled the legal criteria were not met. The administration is now relying primarily on Section 232 and Section 301 authorities.

Mexican President Claudia Sheinbaum has criticized deaths of Mexican nationals in U.S. custody and the removal of Mexicans to third countries. Mexico has also taken steps to address U.S. concerns, imposing 50 percent tariffs on more than 1,000 products from countries without free-trade agreements in December 2024 and submitting legislation to screen foreign investment.

The fiscal year 2026 National Security appropriations law withholds non-fentanyl related foreign aid to Mexico until the Secretary of State certifies Mexico is delivering water owed under a 1944 treaty, and withholds 30 percent of counterdrug assistance until Mexico's antidrug efforts are certified.

What Happens Next

Congress faces decisions on whether potential USMCA revisions require a legislative vote, how to respond to shifting trade flows, and whether to keep or change the tariff authorities the administration is using.Sheinbaum is expected to attend the Asia-Pacific Economic Cooperation summit in Shenzhen in November, where a potential meeting with Chinese President Xi Jinping could add new complexity to USMCA talks; a dynamic a recent CRS report flagged as something congressional overseers will need to watch.

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