But the U.S. president remains a wild card. Mexico is the U.S.’s number one trade partner. Annual trade in goods between the two countries amounts to $840 billion, 10 times Mexico’s trade with the EU. And while Trump has turned his wrath of late on northern neighbor Canada, he first rode to power on a promise to build a wall on the Mexican border. He has, since returning to the White House, imposed extra tariffs and even threatened military strikes against Mexican drug cartels.
The timing of the revision of the United States-Mexico-Canada Agreement (USMCA) — the successor of NAFTA — adds another wrinkle. The free-trade deal between the three North American countries, is up for a review at the start of July. The Trump administration has made noises that it wants major revisions — or even to sink it altogether.
Signing a deal with the EU, with all the pomp and fanfare that entails, risks antagonizing a White House that has made dominating the Western hemisphere under the “Donroe Doctrine” a strategic priority. One EU diplomat who asked to remain anonymous said that the Mexican side was slow-walking negotiations precisely for fear of U.S. retaliation.
More broadly, Trump’s trade agenda is in disarray after the U.S. Supreme Court last week struck down the sweeping tariffs he imposed last year. Trump has announced a new, temporary global tariff of 10 percent, under Section 122 of the Trade Act of 1974. For Mexico, the effective rate would be lower, at 5.2 percent, thanks in large part to the USMCA.
Bad timing
The updated EU-Mexico agreement has had a difficult birth.
The two sides first announced that they had reached an agreement in 2018. But the change of the government in Mexico with the election of the left-nationalist Morena party, led by Andrés Manuel López Obrador, reset talks. Obrador had made state control of energy utilities a key plank of his program, requiring a new round of negotiations. But in January last year, the EU announced once again that the two sides had reached a deal.