Canada’s Efforts to Strengthen Ties with Mexico Amid Trade Tensions
As tensions continue to rise in Canada’s trade negotiations with the United States, Canadian officials are actively seeking new partnerships, including with one of its closest neighbors: Mexico. This initiative has gained momentum following discussions at the G7 summit in Kananaskis, Alberta, where Prime Minister Justin Trudeau invited Mexican President Claudia Sheinbaum for a private meeting. The move highlights an effort by Canadian leaders to diversify their economic relationships and reduce dependency on the U.S.
Foreign Affairs Minister Anita Anand and Finance Minister François-Philippe Champagne recently traveled to Mexico City to build a stronger bilateral economic relationship. Their visit was aimed at exploring new opportunities and strengthening strategic partnerships with Mexican business leaders. However, some experts have questioned why these efforts haven’t been made earlier, especially given that Mexico is a more significant trading partner than countries like France and the United Kingdom.
Laura Macdonald, a political science professor at Carleton University, pointed out that there has historically been a reluctance by Canada to engage seriously with Mexico. She noted that when Canada does attempt to work with Mexico, it often faces challenges. Despite this, the recent visit by Anand and Champagne signals a willingness to change the status quo.
No Bilateral Trade Agreement in Sight
Despite the positive tone of the meetings, no bilateral trade agreement was announced during the talks. President Sheinbaum emphasized that Mexico already has a comprehensive trade deal with both the U.S. and Canada under the Canada-U.S.-Mexico Agreement (CUSMA). She stated that there is no need for a separate agreement, as the existing framework covers all necessary aspects.
Anand and Champagne’s focus during the trip was on exploring new opportunities and strengthening strategic partnerships. However, building a more robust relationship between Canada and Mexico will require ongoing efforts. Macdonald highlighted that Canadian businesses have traditionally prioritized U.S. partners, leading to a lack of investment in understanding the Mexican market, such as learning Spanish or overcoming cultural barriers.
She also criticized the perception of Canada as a cold country and an extension of the U.S., which has hindered deeper engagement with Mexico. Macdonald pointed out that Canada needs to see Mexico as a modern, diverse economy rather than just a site for low-wage production.
Economic Potential and Challenges
Economists and trade experts argue that the potential for increased trade between Canada and Mexico is significant, especially in areas not covered by CUSMA. These include raw materials like lumber and critical minerals, as well as goods subject to high U.S. tariffs, such as steel, aluminum, copper, autos, and pharmaceuticals.
Stuart Bergman, vice-president and chief economist at Export Development Canada, has called for Canada to strengthen its trade relationship with Mexico. He noted that only three per cent of Canada’s two-way merchandise trade is with Mexico, compared to 70 per cent with the U.S. Bergman suggested that a portion of Mexico’s imports from China could be replaced by Canadian products, particularly in sectors like automotive and parts.
The Business Council of Canada echoed this sentiment, stating that Canada’s trade and business ties with Mexico are “underdeveloped and far below its potential.” While Canadian investments in Mexico have grown significantly since 2010, Mexican investment in Canada has remained stagnant at $3.1 billion US in 2023.
Rumors of a “Northern Corridor” Trade Plan
Amid these efforts, a rumor emerged about a potential “trade corridor” between Canada and Mexico that would bypass U.S. duties. This idea was supposedly outlined in an AI-generated YouTube video, claiming that Canada and Mexico plan to divert $120 billion worth of U.S. trade by delivering goods via rail and sea without entering Texas ports.
However, experts have dismissed the claims as unrealistic. Debra Steger, a professor emerita at the University of Ottawa, questioned how such a plan could be implemented, noting logistical and financial challenges. She also expressed hope that Canadian officials are exchanging information with Mexican counterparts regarding their negotiations with the U.S.
When asked about Mexico’s exemption from U.S. tariffs, Anand did not provide a direct answer, instead emphasizing the complexity of Canada’s trade relationships with Mexico and the U.S. Meanwhile, Prime Minister Trudeau indicated that Canada could ease up on retaliatory tariffs and may speak with U.S. President Donald Trump when the timing is right.
Looking Ahead
As Canada continues to navigate its trade relationships, the push to strengthen ties with Mexico represents a strategic shift. While challenges remain, the potential for expanded economic cooperation is clear. With continued dialogue and mutual understanding, Canada and Mexico could unlock new opportunities that benefit both nations.