As the US presidential election day nears, uncertainty increases in Mexico with trade concerns regarding the upcoming 2026 review of the United States-Mexico-Canada Agreement (USMCA). The campaign rhetoric used by both main candidates as well as economic disagreements could have a detrimental impact on M&A activities, according to sources.

The general perception in Mexico is that a renegotiation of the trade agreement would be more difficult with Donald Trump, a manager director at a global private equity firm with offices in Mexico said.

Trump’s administration was marked by a transactional approach to trade –reflecting his “America First” views–, and as a candidate for a second term he has vowed to increase tariffs on automobiles manufactured in Mexico to prevent Chinese producers to benefit by supplying auto parts for Mexican-assembled cars, Victor Ceja, Head of Economic Research at Mexico City-based Valmex brokerage house, told this news service.

While Trump’s proposal would negatively impact M&A activity and foreign investment in Mexico, it is unlikely to be implemented, as it would undermine the original intent of the trade agreement and could lead to discontent not only from Mexico but also from Canada, Ceja said.

Other measures proposed by candidate Trump, like a general blanket tariff of up to 20% on all imports, could violate the USMCA and trigger a response from Mexico, Kenneth Smith Ramos, partner at Mexico City-based Agon law firm, president of the local International Chamber of Commerce’s group on economic policy and former Mexico’s USMCA chief negotiator said.

However, the scenario would not be necessarily easier for Mexico if Kamala Harris were to become the first female president of the US. The candidate was one of 10 US senators who voted against the USMCA’s ratification in 2020. “I knew it was not sufficient to protect our country and its workers,” she said on the X platform last September.

Some swing states like Pennsylvania and Michigan that could define the election are part of the Rust Belt, where some voters still feel bitter about manufacturing jobs losses and tend to blame NAFTA as well as the USMCA. Harris needs to court these constituents with promises to keep stricter labor and environmental policies and possibly to bring back some of these lost jobs, said Pedro Canabal, partner at London-based Baker Tilly law firm and vice chairman at local law practitioners ANADE’s foreign trade committee.

Unlike Trump, who seems to favor tariffs, Harris would like to use the 2026 USMCA review as her main tool to add remedies to the commercial relationship imbalances, said Alberto Santillan, partner at Mexico City-based Santillan Gaitan law firm and coordinator of Mexican law bar BMA’s foreign trade commission.

Mexico is the largest trading partner of the US, which imported USD 529bn on Mexican goods and services in 2023, about 52% more than the trade registered in 2020, when the latest USMCA trade agreement entered into force, according to data from the US government’s Bureau of Economic Analysis.

Whichever candidate emerges as the winner in the November election, she or he will have a set of measures to model the commercial relationship with Mexico, said Emilio Arteaga, foreign trade partner at Vazquez, Tercero & Zepeda law firm. These include tariffs and other punitive measures that protect US national security or combat commercial measures from trade partners that burden or restrict US commerce, as well as others that prevent the import of goods made with forced labor, the expert added.

Arteaga noted that the only tangible danger for Mexico could be a call to open an investigation against cars manufactured in Mexico as they could include surreptitiously materials or components made in countries like China, but warned that these measures require to be preceded by administrative procedures like investigations from entities such as the United States Department of Commerce or the United States Trade Representative.

The ‘nearshoring effect’ started to prove its strength in helping drive M&A deals in Mexico since 2023, as previously reported. The main sectors driving nearshoring in the country have been the automotive sector -including TIER 2 and TIER 3 suppliers- in the Northeast of the country and in the Bajio region and the Electronics and Appliances industry in the West and Northwest region of the country, according to a report by CBRE Research. General manufacturing, chemicals and packaging are also behind the rise of this phenomenon, experts agree.

Machinery and electrical appliances accounted for approximately 38% of the monetary value of Mexico’s exports to the US in August, followed by transport equipment with 27.5%, medical devices with 5.5% and vegetables with 2.9%, according to data compiled by Mexican central bank Banxico.

However, in recent years the US direct investment (FDI) in Mexico has experienced fluctuating figures. After the COVID-19 pandemic, the country received USD 13.7bn from FDI in 2021 and jumped to USD 20.2bn the following year before falling back to USD 13.7 bn last year, according to data from the Mexican Secretary of Economy.

Also, the M&A activity in the country has seen a decrease, as the Mexican competition authority COFECE reviewed USD 23.5bn in M&A deals in 2023, 4.6% less transactions than in 2022, as reported.

The electoral uncertainty has made some foreign investors to pause their initiatives in Mexico as they wait for the US election’s outcome, Alberto Santillan said, adding that a compounding factor are recent actions from former President Andres Manuel Lopez Obrador that weakened the legal framework for institutions in the country, such as a constitutional amendment that removes federal judges and magistrates.

After three decades of trade integration between Mexico and the United States, any trade measure that hampers this integration will be noticed in both sides of the border, Santillan added.