Mexico and Canada are shadowboxing for Trump's favor

Mexico and Canada are competing for President-elect Trump’s favor ahead of his Jan. 20 inauguration, each trying to make their case as the more essential North American ally.

But both Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum are shadowboxing, pulling back from direct conflict between the two $2 trillion economies inextricably linked to — and forced to negotiate with — the $30 trillion behemoth.

“Talking to Mexicans and Canadians, they each see that they need to get to a position where they can negotiate together with the United States. That's not the position they're being offered right at the moment, but I think they will try to move in that direction,” said Earl Anthony Wayne, a former U.S. ambassador to Mexico and co-chair of the Wilson Center’s Mexico Institute Advisory Board.

“Now, it's a little harder to do with somebody who's not in government yet, but they will have to get there. And I think that, from their perspective, would be a much wiser thing to do. From a U.S. perspective, you could debate which one is the wiser thing to do.”

Trump, who has threatened sweeping tariffs unless his demands are met, is widely seen to be using a “divide and conquer” strategy with the two neighbors, who are also the United States’ top two trading partners.

Trudeau and Sheinbaum’s barbs have shied away from direct confrontation, but they’ve shown some brewing resentment.

In response to a statement last month by Ontario Premier Doug Ford that Mexico has become a “back door for Chinese cars, auto parts and other products into Canadian and American markets,” Trudeau highlighted the northern country’s willingness to work with the United States “and hopefully Mexico as well” to ensure China abided by global trade rules.

And Canadian Ambassador to the United States Kirsten Hillman commented on Trudeau’s conversations with Trump, telling The Associated Press on Sunday “the message that our border is so vastly different than the Mexican border was really understood.”

Sheinbaum took offense to that statement, responding that “Mexico is to be respected and more so by our trade partners.”

“They wish they had, truly, the cultural wealth of Mexico, of our ancestors, of our originary peoples. Mexico has more than 3,000 years of history and precolombian, prehispanic, grandiose civilizations,” she later added at her daily press conference on Monday.

The sniping reflects the lopsided power balance between the two countries and the United States, and an acknowledgement of Trump’s desire to exploit it.

Ironically, North American integration was in part envisioned as a tool to smooth that imbalance.

Since the North American Free Trade Agreement (NAFTA) negotiations in the early 1990s, U.S. trade negotiations have sought to first level asymmetries — set a more or less even field before launching into negotiations — before jumping into the horse trading that molds the technical aspects of trade agreements.

The NAFTA model successfully pried open a previously closed Mexican economy, and a decade later, helped forge the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), which geared more toward regional development than to opening significant markets to U.S. goods and services.

But no one expects the regional development argument to tug at Trump’s heartstrings.

“Within the success, a lot of challenges remain, and with the incoming U.S. administration and with the announcements of tariffs that we've just heard in the last couple of weeks, there is a real question, sort of surrounding North America integration, about free trade, nearshoring and also, of course, this under the upcoming 2026 USMCA [United States-Mexico-Canada Agreement] review process, which, for the last couple of years, I think everyone was trying to focus on the fact that it was a review and not a renegotiation. And I think that's up in the air,” said Lila Abed, director of the Wilson Center’s Mexico Institute.

USMCA, built as a NAFTA replacement during Trump’s first term in office, included a review clause triggered six years after implementation of the deal signed in 2020.

But the review clause was explicitly not a sunset clause — an idea proposed by the first Trump administration to trigger four years after initial ratification. The proposal drew the ire of Canadians, Mexicans and Republican business groups, but it ultimately made it into the agreement as the 2026 review clause, and a harder sunset clause due in 2036.

Trump’s return to Washington has shifted the carefully negotiated dynamics of 2026 and set Canada and Mexico on a collision course.

Those skids have been greased by internal Canadian political dynamics, with Conservatives holding a commanding lead over Liberals in national polls ahead of a 2025 election.

Conservative leader Pierre Poilievre has borrowed pages from Trump’s campaign playbook, running on the line that “everything is broken” under Trudeau and shoving aside any notion of North American regionalism.

“Canada first,” Poilievre told a reporter on Nov. 26, in response to a question on the idea of Canada striking a separate bilateral deal with the United States and leaving Mexico aside.

“Let’s put it this way. One, I only care about Canada. I want to put our country first. Two, America is responsible for over 60 percent of our trade. We trade more with the U.S. than we trade with the rest of the world combined. I will do what is necessary to preserve and protect that relationship above all others.”

Both Sheinbaum and Trudeau are staging their fight for domestic audiences, with the difference that he is on a political ledge, while she is fresh off a landslide victory with approval numbers hovering around 70 percent.

Political bickering aside, trade agreements are built with massive input from the private sector.

“There's a big difference between what the private sector in Canada is thinking of USMCA and what some politicians are saying about it very loudly, and Mexico and Canada have been in this position before. This is not the first time we did this. In 2018 — and I think the divide and conquer strategy didn't work then,” said Diego Marroquín, a Wilson Center scholar at both the Mexico Institute and the Canada Institute.

“And I hope that it's not going to work now, because, as I said, we're stronger together, and for the two smaller parties, it makes a lot more sense to work together in order to have a successful rebalancing of some of the concessions of the agreement.”

At one point in 2018, Canada had been sidelined from negotiations, with the United States and Mexico signaling proximity to a deal, but eventually all three parties came to the table.

And U.S. interests could also be better served with a functioning tripartite agreement, aside from the fact that Mexico and Canada are the United States’ largest export markets.

Trump could face some internal pressure to tone down his antagonism, particularly from border states that rely more heavily on USMCA exports.

“Trade with Mexico and Canada supports millions of jobs in Texas. If Trump is serious about starting a trade war with our allies, his administration will be putting those jobs at risk,” said Rep. Joaquin Castro (D-Texas).

Canada is a major oil producer, a NATO colleague and a strategic Arctic ally; the U.S.-Canada relationship has geopolitical clout beyond trade.

And Mexico is unlikely to meet its migration or security goals — nor continue to grow as a market for U.S. goods and services — unless its economy is on the rise.

“If we had the chance to talk to President Trump and talk to him about energy, I guess the first thing I would want to say to him is that we have an extremely interdependent relationship with Mexico on energy which is a great source of prosperity and resilience and energy security for the United States,” said David Goldwyn, an international energy consultant.

“The second thing I would say to him is that energy … is really integral to Mexico's prosperity, and Mexico's prosperity is of national security importance to the United States. A prosperous Mexico which generates economic growth and sufficient employment for its citizens and an environment which can host companies which can supply goods to the United States, reduces migration pressure, reduces the power of the cartels, increases the amount of trade between the two countries. Because a wealthy Mexico buys an enormous amount of products from the United States, and without national income, they can't really do that,” added Goldwyn.