By David Lawder
MEXICO CITY, July 21 (Reuters) - U.S. and Mexican trade negotiators will meet for a third round of bilateral talks on Tuesday to try to push forward with revising the North American trade agreement, just as President Donald Trump slaps Canada with a new set of punitive duties.
The talks, which exclude Canada, are set to run for three days and are the first formal discussions on changes to the U.S.-Mexico-Canada Agreement since the Trump administration declined to extend the six-year-old
regional trade pact on July 1.
The move started a clock to wind down USMCA within 10 years unless the three countries can agree on improvements. Industry groups have urged Trump to keep intact the trilateral structure and largely tariff-free access that underpins nearly $1.6 trillion in annual trade.
Mexico's new ambassador to the U.S., Roberto Lazzeri, said on Friday that Mexico was expecting to reach a new deal by the end of the year, and that he believes the U.S. and Canada are aiming for the same goal.
"Every moment that we're losing, I think we are losing competitiveness, market share and investment, so it's in the best interest of all three of us to get to a position of resolution soon," said Lazzeri, a former investment banker and finance ministry official.
He added that Mexico shares the Trump administration's goal of bringing more manufacturing to North America, including to the U.S. Another key goal for Mexico is to win some relief from Trump's 25% national security tariffs on Mexican autos and 50% on its steel and aluminum products, duties also applied to Canada.
The talks come a day after the Trump administration announced new tariffs on nearly $20 billion worth of Canadian goods over Ottawa's retaliatory tariffs on U.S. autos, steel, aluminum and liquor and its high dairy tariffs.
That move deepens a rift that has kept Canada largely sidelined in the USMCA negotiations, as U.S. Trade Representative Jamieson Greer has said there has been little movement towards concessions.
Canadian Prime Minister Mark Carney said in a statement that his government had made comprehensive proposals to resolve trade disputes with Washington, adding that Trump's past tariffs violated the North American trade pact.
Greer has meanwhile lauded Mexico for its lack of retaliation to U.S. tariffs and "pragmatic" approach to negotiations that include work to align Mexico's export controls with those of the U.S., steps to protect intellectual property rights and moving to curb the export of avocados grown on illegally deforested land.
AUTOS AND ECONOMIC SECURITY
The talks in Mexico City will dig into technical details of U.S.-Mexico trade in autos, steel, aluminum, agriculture and labor, according to Greer's office.
The discussions will also focus on "economic security," USTR's term for raising regional trade protections to keep China and other Asian countries from using Mexico and Canada to access the lucrative U.S. market on preferential terms.
China's growing footprint in Mexico's car market represents a potential irritant in the talks. Reuters on Monday reported that new distribution figures showed Chinese car sales rose 30% in the first half of 2026, despite 50% tariffs imposed in January, with Chinese brands raising their market share to 17% from 14% a year earlier.
People familiar with the talks have said that the U.S. wants its North American partners to erect similar trade barriers to non-regional goods, including vehicles, auto parts, steel, aluminum and other components.
During bilateral USMCA talks with Mexico in May, USTR proposed requiring that 50% of the value of North American-built vehicles originate in the United States, a significant departure from current rules and a difficult adjustment for automakers with highly integrated regional supply chains.
Greer says that the growing trade deficit with Mexico, which has benefited from supply chains moving away from China due to past tariffs, remains a key concern for Trump in considering the future of USMCA. That gap grew $28 billion, or 17%, to $197 billion in 2025, according to U.S. Census Bureau data.
(Additional reporting by Emily Green in Mexico City; Editing by Hugh Lawson)
