President Donald Trump and Mexican President Claudia Sheinbaum are signaling that a major trade agreement is within reach, aimed at slashing the U.S. trade deficit with Mexico. While Trump claims the deal could potentially reduce the $150 billion deficit “to zero,” Sheinbaum has emphasized that any agreement must remain within the bounds of the Mexican Constitution and protect national employment, as reported by Reforma.
This diplomatic dance comes at a high-stakes moment. With U.S. midterm elections scheduled for Nov. 3, 2026, both administrations are racing to stabilize the economic relationship. “losing” billions of dollars, while Mexico is fighting to eliminate tariffs on steel, aluminum, and vehicles to keep its industrial engine humming.
The $150 Billion Battleground
The numbers driving this negotiation are staggering. During a campaign rally in Park City, Kansas, Trump asserted that the U.S. loses $150 billion through its trade relationship with Mexico, according to Proceso. He suggested to Roger Marshall that this deficit could be eliminated entirely, framing the current arrangement as one where the U.S. is “carrying” its neighbors.
On the other side of the border, the priority is stability. President Sheinbaum confirmed that while the two nations are “very close” to a deal, several sticking points remain. Her primary goal is the maximum reduction of current tariffs on vehicles, steel, and aluminum. Sheinbaum noted that while the U.S. government has shown a “very good attitude,” Mexico will not negotiate anything that harms the national economy or violates sovereign laws, La Jornada reported.
Howard Lutnick Disrupts U.S. Negotiation Strategy
Despite the optimistic public rhetoric, the machinery inside the U.S. government appears fragmented. Analysis from El Financiero suggests that Howard Lutnick, the U.S. Secretary of Commerce, has been a disruptive force in the negotiations. Lutnick has reportedly pushed the narrative that Mexico should remain a provider of raw materials rather than high-value goods, arguing that Mexican auto manufacturing “steals” jobs from American workers.
This internal divide confuses Mexican negotiators. While USTR Jamieson Greer handles the general text of the agreement, Lutnick manages Section 232 tariffs and AI-related trade. This fragmented approach has forced Mexico to spend its political capital inefficiently, according to El Financiero, as Lutnick often pursues a personal agenda aligned with Trump’s instincts rather than a coordinated departmental strategy.
Mexico Uses Steel Traceability to Strengthen Position
Mexico is using technical wins to secure a better deal. Secretary of Economy Marcelo Ebrard stated that Mexico is in a strong relative position because it has implemented stricter steel traceability measures than the U.S. Ebrard claimed that Mexican teams verifying plants in Asia recently identified and removed over 1,000 fraudulent certificates, proving Mexico is not a conduit for illegal transshipments, El Economista reported.
However, the actual signing of a revised USMCA (T-MEC) may be paused until after the U.S. midterms. Ebrard indicated that Mexico has provided all necessary technical elements and is now waiting for the Trump administration’s decision, which is expected in the coming weeks but likely finalized after the Nov. 3 elections.
Security Cooperation as a Bargaining Chip
The trade talks are not happening in a vacuum; they are being bundled with security concessions. President Sheinbaum highlighted recent “mirror operations” on the border, where the U.S. military and the Mexican Army or National Guard operate in synchronized zones to combat organized crime. She maintains that this collaboration does not compromise sovereignty but serves as a foundation of mutual trust.
Mexico has also leaned into intelligence sharing to show its value as a partner. Sheinbaum noted that Mexican authorities have recently detained five of the FBI’s ten most wanted fugitives, framing these arrests as a sign of the high-level coordination currently existing between the two capitals, La Jornada reported.
Mexico Measures National Content in Energy Projects
The window for a final resolution is narrowing. With the APEC summit in Shenzhen on Nov. 18-19 and the G-20 summit in Miami on Dec. 14-15, there are two opportunities before the end of the year for a face-to-face meeting between Sheinbaum and Trump.
