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Trump's Second Term: Where is Mexico Headed?
- Author Sungwoo Hong
- Series320
- Date2025-07-23
As the Trump administration returns to power in 2025, its foreign policy toward Latin America has quickly revealed familiar features: unilateralism and transactional diplomacy. Among Latin American nations, Mexico finds itself in the most precarious yet pivotal position.
Facing intense economic and political pressure, the Mexican government under President Claudia Sheinbaum has opted for a calibrated, dual-track response. On one hand, Mexico has acted swiftly to demonstrate alignment with U.S. trade interests, particularly in curbing Chinese transshipment or detour exports to the U.S. through Mexico. Key trade actions include ending EV tariff exemptions for non-FTA countries, imposing high tariffs and temporary bans on selected textile and apparel products, and revoking import licenses of over 1,000 steel and textile firms accused of abuse. Although the Mexican government did not specify the target of these actions, they appear to be aimed at China, given the trade statistics. While these measures align with U.S. expectations, they also serve Mexico’s domestic objectives—namely, protecting local industries and redirecting foreign investment in a specific industry.
Complementing these trade actions, President Sheinbaum has unveiled the “Plan México,” a medium-term national development blueprint targeting eight strategic industries: semiconductors, autos and electric vehicles, pharmaceuticals, aerospace, consumer goods, chemicals and petrochemicals, agriculture, and textiles. The plan is to deal with global uncertainties caused by the Trump administration as well as to maintain consistency in social and economic policies with those of former Mexican President Obrador. Through Plan México, the government is prioritizing domestic production by leveraging tariffs, import substitution, support for local SMEs, and the strengthened role of state-owned enterprises—aiming to boost competitiveness, reduce export dependence on the U.S., and enhance economic self-reliance.
Nonetheless, implementation hurdles persist. Questions about the state’s fiscal capacity and bureaucratic readiness remain unresolved, and these could worsen if inbound FDI and exports to the U.S. decrease. Moreover, attempts to boost domestic industrial output might undermine the competitive advantages that have historically made Mexico attractive to foreign investors.
One of the more critical tensions in Mexico-U.S. trade relations under Trump 2.0 revolves around the upcoming USMCA review, which escalates the uncertainty facing Mexico. In this context, Plan México’s push for domestic supply chain development and reduced dependence on Chinese inputs may serve dual purposes: securing USMCA benefits and avoiding punitive tariffs.
Mexico’s geopolitical positioning is further complicated by Latin America’s fragmented response to U.S. pressure. At the 9th CELAC Summit in April 2025, the region failed to present a unified stance. While Mexico proposed a regional prosperity agenda, Argentina, Paraguay, and Nicaragua refused to endorse the Tegucigalpa Declaration. Instead, Mexico and Brazil took the initiative to deepen bilateral ties through the potential expansion of their ACE 53 and ACE 55 economic complementarity agreements, focusing on industrial tariff reductions, particularly in the automotive sector.
Meanwhile, China has intensified its presence in the region through the CELAC-China Ministerial Forum. Beijing committed over $9 billion in infrastructure lending, investments and cooperation in key sectors including EVs, green fuels, and mining, and an increase in imports from Latin America. This has left Mexico in an awkward position: aligning with Washington’s strategic goals while watching its southern neighbors deepen ties with its competitor.
Looking ahead, three plausible trajectories emerge. The first scenario posits sustained U.S. pressure, with the Trump administration pushing for aggressive USMCA revisions such as sector-specific tariffs, tariffs on non-U.S. components, and tighter enforcement of rules of origin. This would force Mexico to accelerate its import substitution policies, with unclear consequences for competitiveness. The second scenario involves managed stability, where current trade terms are maintained in exchange for Mexico’s stricter enforcement against Chinese transshipment and detour exports through Mexico. This would ensure supply chain continuity while pressuring Mexico to demonstrate loyalty through trade policing. The third scenario envisions diversification through regional realignment. If the U.S., in exchange for Central America’s cooperation, supports economic integration with the region, supply chains in the Americas could shift, and accordingly, Mexico’s position within them could change as well.
In Trump’s second term, Mexico is walking a tightrope. It must appease an unpredictable partner, preserve its export engine, and avoid being replaced in regional supply chains. While Mexico has responded pragmatically so far—through trade concessions, industrial policy, and regional outreach—it remains vulnerable to shifts in U.S. political winds. Whether Plan México succeeds or falters will depend not only on policy coherence and inbound FDI, but also on the stability of its most important relationship: that with the United States. Strategic engagement of South Korea and other partners must therefore blend trade, diplomacy, and long-term industrial cooperation.
Ph.D. in Economics, Research Fellow
Head of Africa, Middle East, and Latin America Team
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