Estados Unidos Mexicanos — Canada's third-largest trading partner and a CUSMA co-signatory under active joint review
Mexico is Canada's third-largest trading partner, with bilateral goods trade of approximately C$50B+ (2024, Statistics Canada) CAD in 2024 (StatCan), driven by the Canada-United States-Mexico Agreement (CUSMA/USMCA), in force since July 2020. Canada imports significantly more from Mexico than it exports — primarily automotive components, consumer electronics, fresh produce, and manufactured goods — running a $21B deficit. The Canada-Mexico relationship operates within the trilateral CUSMA framework, making it structurally inseparable from Canada-US dynamics: the 2026 CUSMA joint review, initiated under the terms of the agreement, is the dominant near-term trade policy variable for all three parties. President Claudia Sheinbaum — Mexico's first female president, inaugurated October 2024 — leads a Morena government with a strong congressional majority that has pursued energy nationalism and judicial reform, creating new regulatory uncertainty for foreign investors. US tariff pressure on Mexico under the Trump administration (2025–present) is disrupting nearshoring investment flows that had been redirecting supply chains from China to Mexico.
Claudia Sheinbaum governs with a congressional supermajority inherited from AMLO's Morena coalition, enabling constitutional amendments without opposition support. Her administration has continued AMLO's energy nationalism — asserting Pemex and CFE primacy in oil and electricity — and passed a controversial judicial reform in late 2024 that establishes direct popular elections for judges, a model opposed by the US and Canada as undermining rule-of-law standards embedded in CUSMA's investment protection provisions.
The bilateral Canada-Mexico diplomatic relationship remains functional and commercially productive. Canada and Mexico have historically been natural CUSMA allies against US unilateral action. However, divergences are emerging: Mexico's accommodation of Chinese manufacturing investment as a "nearshoring" platform (allowing Chinese goods to access North American tariff preferences through Mexican assembly) is a source of US-Mexico tension that directly implicates CUSMA's rules-of-origin provisions — a key Canadian concern in the 2026 review.
Mexico's economy grew 1.5% in 2024 — below potential given nearshoring investment inflows — as the domestic fiscal position tightened and investment uncertainty increased following the judicial reform and Pemex fiscal difficulties. The IMF projects further deceleration to approximately 1.2% in 2025, with US tariff imposition on Mexican goods (including a 25% tariff announced in early 2025) as the primary headwind. Mexico's export economy is deeply integrated with the US: approximately 80% of Mexican exports go to the United States, making Canadian trade flows effectively a subset of the trilateral CUSMA supply chain rather than independent bilateral commerce.
The nearshoring opportunity — driven by US-China decoupling and companies reshoring supply chains to CUSMA-preferential Mexican manufacturing — has been partially disrupted by US tariff actions targeting Chinese-owned or Chinese-financed Mexican facilities. Canadian companies assessing Mexico manufacturing partnerships must verify supply chain provenance to ensure CUSMA rules-of-origin compliance and avoid association with Chinese-owned production flagged for US customs enforcement.
Top Canadian exports to Mexico: Potash and fertilizers (~$2.5B) — Mexico is a major agricultural economy with structural potash import demand; motor vehicles and parts (~$1.8B), reflecting integrated CUSMA automotive supply chains; mineral fuels (~$1.4B); machinery and equipment (~$1.2B); plastics and chemicals (~$0.8B); agricultural products including canola meal and pulse crops (~$0.7B).
Top Canadian imports from Mexico: Motor vehicles and automotive components (~$10B) — Mexico is a major CUSMA automotive manufacturing hub; electronics and electrical equipment (~$6B); fresh produce, vegetables, and tropical food products (~$5B); machinery (~$4B); silver and metals (~$2B). The import mix reflects Mexico's role as a low-cost assembly platform for North American OEMs and a major year-round food supplier to Canadian retailers.
Non-tariff barriers in Mexico for Canadian exporters include: customs process complexity and inconsistency (particularly for agri-food with phytosanitary requirements); energy sector regulatory unpredictability under Pemex/CFE-prioritization laws that have prompted CUSMA Chapter 31 dispute consultations from Canada and the US; and municipal and state-level permit requirements that add cost and timeline to manufacturing and construction projects. The judicial reform (2024) adds legal system unpredictability: direct election of judges removes formal independence standards and makes the enforceability of commercial arbitration awards in Mexican courts less certain.
Look up import and export tariff rates for goods traded between Canada and Mexico.
Open Tariff Reference Tool →Scotiabank Mexico is the largest and most strategically significant Canadian business in Mexico, operating as Scotiabank México with approximately 14 million customers, ~1,000 branches, and roughly $70B USD in assets — a position built through the 2000 acquisition of Grupo Financiero Inverlat and subsequent organic growth. Scotiabank views Mexico as a core Pacific Alliance market integral to its Latin American strategy, though Morena-era financial regulation has increased compliance costs and limited pricing flexibility.
In mining, Agnico Eagle operates the Pinos Altos and Creston Mascota gold mines in Chihuahua; First Majestic Silver operates multiple silver mines in Sonora, Durango, and Zacatecas; Pan American Silver holds the La Colorada mine in Zacatecas. Collectively, Canadian mining companies represent one of the largest foreign private sector presences in Mexican hard rock mining. Operating conditions have deteriorated since 2019 — water permit revocations, community consultation requirements under the Indigenous Peoples' Consultation Law (2023), and organised crime pressure on mine sites in Sinaloa and Chihuahua have elevated costs and suspended production at several operations.
Brookfield Asset Management holds infrastructure assets in Mexico, including toll roads and real estate, through its Latin American operations. Canadian automotive suppliers — Magna International, Martinrea, Linamar — operate manufacturing facilities in Mexico's Bajío and northern industrial clusters, supplying CUSMA-compliant components to OEM assembly plants.
| Risk Category | Level | Assessment |
|---|---|---|
| Rule of Law | High | Judicial reform (2024) establishes elected judges, undermining independence; commercial arbitration enforceability is less certain; regulatory decisions in mining, energy, and telecom have been reversed by executive action without due process. |
| Security | High | Organised crime (cartel) violence directly affects mining, transport, and construction operations in multiple states including Sinaloa, Michoacán, Chihuahua, and Guerrero. Extortion of suppliers and contractors is documented. Security costs and contingency planning are mandatory for physical operations outside major metros. |
| CUSMA / Trade Policy | High | 2026 CUSMA review creates tariff uncertainty for all North American supply chains. US tariff imposition on Mexico under Trump (2025) disrupts nearshoring investment thesis. Chinese manufacturing investment in Mexico using maquiladora structures may trigger US rules-of-origin enforcement affecting Canadian buyers of Mexican-made goods. |
| Political / Regulatory | Moderate | Sheinbaum administration has strong majority but has not introduced major new foreign investment restrictions beyond AMLO-era energy sector changes. Regulatory uncertainty is highest in energy, mining, and water. Financial sector regulation is tightening but remains commercially viable for established operators. |
| Currency | Moderate | MXN/CAD volatility is moderate; peso has been resilient due to nearshoring capital inflows and high Banxico rates, but US tariff imposition caused a 10% peso depreciation in early 2025. Commodity exporters (potash, canola) benefit from USD-denominated contracts. |
| Commercial Credit | Moderate | Pemex insolvency risk has been partially contained by government capital injections, but the national oil company's $106B USD debt remains a sovereign contingent liability. Mexico's investment-grade sovereign rating (Baa2/BBB) could face pressure if Pemex fiscal deterioration accelerates. |
Mexico presents one of the highest corruption and compliance risks among Canada's major trading partners. Systematic bribery permeates customs, permitting, procurement, and subnational government contracting. The dominance of organized crime across much of Mexico's territory creates an additional compliance layer beyond standard CFPOA due diligence — Canadian companies must assess whether counterparties or markets have connections to cartel-linked economic actors, which is a distinct and more serious risk than standard political corruption. Sectors with high geographic exposure (agri-food supply chains, logistics, manufacturing in northern states) carry the highest third-party risk.
PEP screening must be rigorous — political and commercial networks in Mexico are deeply interconnected, and state-owned enterprises (Pemex, CFE, IMSS) create PEP adjacency risk throughout their supply chains. Mexico is not FATF-listed but faces serious money-laundering challenges given cartel activity. The CUSMA framework provides legal protections but does not eliminate operational corruption exposure. CTI rates Mexico High Compliance Risk requiring a documented CFPOA program, enhanced agent and distributor screening, and security due diligence before market engagement.
CUSMA's government procurement chapter (Chapter 13) extends access to certain Mexican federal government procurements to Canadian suppliers above defined financial thresholds. However, Mexico negotiated more limited coverage than the US under the chapter, and Pemex and CFE (the state oil and electricity companies) are explicitly excluded from CUSMA procurement disciplines — a material limitation given their dominant role in Mexico's energy economy.
1. Statistics Canada, Table 12-10-0011-01: International merchandise trade by country, 2024 annual data.
2. International Monetary Fund, World Economic Outlook, October 2024: Mexico GDP, growth forecast, inflation.
3. Instituto Nacional de Estadística y Geografía (INEGI): Mexican GDP, unemployment, CPI data, 2024.
4. Global Affairs Canada, CUSMA — Canada-United States-Mexico Agreement, text and implementation materials, 2020.
5. Natural Resources Canada, Canadian Mining Operations in Mexico, annual data.
6. Scotiabank Annual Report 2024: Mexico operations, customer and asset data.
7. Moody's Investors Service / S&P Global Ratings: Mexico sovereign credit rating, 2024.
8. Global Affairs Canada, Chapter 31 Dispute Consultations (Canada v. Mexico, energy), 2021–2026.
9. USTR, Section 301 Tariff Actions on China-Linked Mexico Manufacturing, 2025.
10. Trade Commissioner Service, Mexico Country Market Reports, 2024–2025: market access intelligence, sector assessments.