US-Mexico trade deal: Both sides race to beat midterm election clock

The United States and Mexico are rushing to strike a bilateral trade deal before the US midterm elections in less than eight weeks.

According to the sources privy to the matter, the urgency of finalizing the deal also stems from the collapse of Canadian negotiations with Washington and subsequent trade war.

"We both want to reach a deal before the midterms," said one Mexico-based source.

Speaking about the nature of the deal, the sources revealed that negotiations are underway to win relief from some US tariffs for Mexico while addressing US demands on areas including automotive content and Chinese investment.

While there is no official deadline, officials from both nations view the upcoming November 3 elections, where the Republican Party risks losing control of Congress, as a strategic political window to secure a deal.

Finalizing an accord beforehand would give both leaders a much-needed domestic win amid their respective political challenges.

"Time is of the ​essence for the Mexican government," said the Mexican source.

According to the source, the potential deal with the US would help Mexico give reassurances to investors and markets at crucial times of a struggling economy.

A spokesperson for Mexico's economy ministry said, "There are no specific deadlines ⁠at this time," emphasizing the government's ongoing commitment to negotiate with Washington.

But reaching the deal would not be without challenges. For instance, Section 232 national security tariffs, 50 percent on steel/aluminium and 25 percent on automobiles for Canada and Mexico, remains a major hurdle in interim trade negotiations.

Automakers believe Mexico could secure a framework similar to Canada's pre-collapse talks: a 15 percent vehicle tariff with additional reductions for US content, dropping the effective rate to roughly 7 percent.

To achieve this, Mexico is expected to yield to US demands for higher American content in vehicles, specifically targeting engines, electronics, and software.

While Mexico officially resists explicit US content mandates, finding a mutually acceptable mechanism to boost American content remains the important unresolved question.