The Decibel - What would a stronger trade relationship with Mexico look like?

Episode Date: February 20, 2026

This week, Minister for Canada-U.S. Trade Dominic LeBlanc, led a trade delegation to Mexico. He was joined by government and industry officials, as well as leaders of around 250 Canadian businesses. It’s the largest Canadian trade delegation to Mexico in recent memory, and it’s set against the backdrop of Prime Minister Mark Carney’s goal of diversifying Canadian trading partners. Mark Rendell, the Globe’s economics reporter, joins the show to talk about the opportunities for growth in Mexico, and how the two countries are preparing for discussions around the renegotiation of USMCA later this year. Questions? Comments? Ideas? Email us at [e-mail] Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The complicated Canada-US trade relationship has been headline news for over a year now. And for good reason, President Donald Trump has imposed steep tariffs on Canada and has threatened to blow up USMCA, which is the North American trilateral trade agreement. But we haven't spent nearly as much time talking about our relationship with the other member of that agreement, Mexico. They're not Canada's biggest trading partner, but, But in 2024, Canada and Mexico exchanged $56 billion in trade. Mexico is a market of over 130 million people, and they're the gateway to the rest of the Americas. So as Canada tries to diversify our trading relationships away from the increasingly unreliable United States,

a delegation of government officials and business people have spent this week in Mexico, strengthening old relationships and building new ones. Mark Rendell is the Globe's economics reporter, and he's here today to tell us about the trip and why it matters. I'm Cheryl Sutherland, and this is the Decibel from the Globe and Mail. Hi, Mark. Thanks so much for joining us again on The Decibel. Thanks for having me. So Mark, Dominique LeBlanc, the federal minister responsible for Canada-US trade, is in Mexico this week, leading this huge trade delegation of around 250 companies and business groups. So to start, what is the extent of the Canadian-Mexican commercial relationship? Like, where are we at with trade?

Give me some numbers here. Yeah. So, you know, we signed NAFTA with the Mexicans and the Americans in 1994. And since then, the commercial relationship has grown a lot. Trade between the two countries is about 10 times bigger than it was in 1994. Canadian companies are significant investors in Mexico. Now, the trade picture is interesting because it's kind of a bit one-directional, I guess. is a way to put it. You know, Mexico in 2024 sent about $47 billion worth of goods to Canada.

We sent, give or take about $8, $9 billion in the other direction. So it's a little bit of a lopsided trade relationship. The investment picture is where a lot of the action is happening. So a lot of Canadian mining companies operate in Mexico. You have a very large Canadian presence in the Mexican auto manufacturing sector. So, you know, really big companies like Linamar, Magna, Martin Rea, all have factories down there. Bombarge has been building plain fuselages down in Mexico for years. And then you have a whole range of other companies. You know, Scotiabank, I don't know if you've ever been to Mexico, but...

I have, yes. You know, you see Scotia Bank's branches on, you know, many, many corners. They have something like 440 branches in the country. They're the sixth biggest bank by deposits. In Mexico, you know, T.C. Energy is built 3,600 kilometers worth of natural gas pipeline in the country. So, you know, from an investment standpoint, Canadian companies are very much there. But from that trade, that export standpoint,

we just import a whole lot more from Mexico than we send back in the other direction. Okay, yeah. So it sounds like you said, the investment part, like there's a lot of Canadian businesses that are in Mexico right now, but that, in fact, we import a lot of things from Mexico. Can you give me a sense of what types of things

we are importing from Mexico? Yeah, so there's the things that everybody would know, tomatoes, go to the grocery store, all the kind of vegetables that we eat through winters, You know, some of that comes from California, lots comes from Mexico. Auto parts is actually the biggest thing. And automobiles as well. So Mexico, you know, over the last 20 years, has emerged as one of North America's kind of principal auto manufacturing hub.

So, you know, 20 or years ago, they produced about a million vehicles a year. Now they produce something like 3.7 million coming up on 4 million vehicles. So huge explosive growth in Mexican auto production. A lot of that comes up to Canada. And again, auto parts. We have auto parts that we make in Ontario. We send down to Mexico. They have auto parts that they send in the opposite direction.

So that's part of that kind of integrated auto economy that we talk a lot about when we're talking about, USMCA. But again, it is somewhat one directional. I think we send about a tenth of the auto parts south as they send north. Really interesting from the auto perspective is since we've been in this trade spat with the US and they've put tariffs on our cars and we've put tariffs on their cars, we're actually importing a lot more Mexican cars because we're not tariffing Mexican cars. So that's kind of an interesting...

Oh, yeah. That makes sense, yeah. It does. So an interesting dynamic there. Okay. And just so we get a little bit of sense of what Canada is sending to Mexico, exporting to Mexico. You said it's quite a bit lower. $8.6 billion. I think $8.7 billion was the number in 2024. Yeah. Give me a sense of what we are exporting

at this point to Mexico. Yes, we send things like auto parts, as we were talking about earlier, south to Mexican auto factories. We also send lots of agricultural goods. south. So, you know, while they're sending tomatoes north, we're sending things like canola and wheat south into Mexico as well. So there's that kind of agricultural trade going on as well. So it sounds like there are some trade, but there's also room for growth. So this kind of brings us

to this trip, right? And this delegation that's there, probably trying to up Canada's exports to Mexico. So give me a sense of where this delegation is going, who are they meeting, which industries are the exploring. That's a lot of questions, but give me a sense of what they're trying to do on this trip. Yeah, so the delegation, as we said earlier on, about 250 companies, business groups. There was, you know, the usual suspects, the auto parts makers, lots of agricultural presence as well. There was also clean tech companies that went down and creative industries going down as well. So, you know, a presence from film and music industry in Canada heading there as well. So a big mix of industries. They were going to Mexico City. They were going to Monterey and they were

to Guadalajara. So the Trade Commission Service, which is Canada's, the government's body that's responsible for basically promoting trade in other countries. They set up something like 2,000 meetings across these three cities between Canadian companies and Mexican companies. So that was kind of the core of the trade mission. You know, trade missions are often all about politicians standing up and shaking hands and maybe you announced two or three big deals. It did seem like this was much more about taking smaller and median size. Canadian companies that don't necessarily have that exposure to the Mexican market, taking them down, setting up those business meetings, making those introductions with the hope that they may not be

leaving with a purchase order, but they've made that connection, they can follow up. So that did seem to be the kind of focus of the trip. I spoke to a couple of business groups that were down there, the Chamber of Commerce, manufacturers and exporters, and they seemed pretty impressed. Like everybody's a bit skeptical about these trade missions, like how much is it just photo ops? but they were impressed. They did say, you know, speaking to companies, they seem to be getting some real value out of going there

and having those meetings set up. Okay, great. So it sounds like it's going well. Can you give me a sense of some of the connections that have been made on this trip? So speaking to business groups who were down there, they seemed very positive about how this whole whole process had gone. You know, they had the Canadian Chamber of Commerce.

Candice Lang was talking about, you know, she'd spoken to a donut company from Atlantic Canada that was, you know, down there shaking hands, trying to get Canadian donuts on Mexican shelves. You know, ahead of the mission, I spoke to export development Canada's person on the ground in Mexico City. EDC is Canada's export financing arm, so they, you know, basically help exporters with things like insurance. They also will offer financing to foreign companies on the condition that they essentially buy from Canadian suppliers. So, you know, there's been some neat examples in recent years.

EDC supplied financing to a Mexican retail chain, big grocery chain called Soriana. They helped finance Mexican telecoms company called Axtel. And in both cases, you've seen a big upsurge in Canadian products, you know, on shelves and Soriana grocery stores and going into Axtel supply chains. I spoke to a company, again, ahead of the trip last week, Vancouver-based company called Food Process Solutions. They make like freezer equipment. And they made their first sale in Mexico in 20. It was kind of a word of mouth thing.

It wasn't until like 2023 where they decided they were going to hire a like an on the ground, Spanish speaking, service team and sales team. And they've since scored two quite significant contracts, a $3 million contract and a $4 million contract to take equipment that's manufactured in PEI and in Vancouver, take it down, put it into meat processing plants down in Mexico. So some cool examples like that of like, you know, companies building things, making connections. getting a ground game, you know, teamed together on the ground in Mexico and actually making real sales happen. We'll be right back.

So, Mark, of course, we're talking a lot about business investment and trade here, but it's against this backdrop of a constantly shifting political landscape, right? Can you give us a bit of the lay of the land of what Mexican and Canadian relations have looked like in the recent past? So back in 2018, during the first Trump administration, you know, he threatened then to pull out of what we called NAFTA at the time and kickstarted this negotiation process that created what we have now, which is Kuzma, USMCA. At that point in time, Trump kind of pursued a bit of a divide and conquer approach to the negotiations. For a while there, he had cut Canada out of the

negotiations, tried to do a bilateral agreement with the Mexicans. The Mexicans ended up basically saying, no, we're not going to do a deal with just you. We want the Canadians back at the table. And so during the last kind of set of negotiations, Mexico played in a pretty important role helping keep Canada at the table and help. Had Canada's back there. Definitely had their back. So, you know, fast forward to Trump's reelection in 2024, pretty much in the immediate aftermath. You had a number of Canadian politicians. Ontario Premier Doug Ford was the most prominent, basically saying, oh, no, don't put tariffs on us, Mr. Trump.

just let's cut the Mexicans out and do a bilateral deal. Canada and Washington can work together and we'll leave the Mexicans on the sidelines. That went down like a ton of bricks in Mexico City, as I'm sure you can imagine. It was seen as gross in gratitude, especially after, again, what happened in 2018, 2019. That caused a real rift in the Canada or the Ottawa-Mexico City relationship. So the relationship does seem to have improved in the last six to eight months. Prime Minister Carney went down to meet Mexican President Claudia Ashain. bomb in September. They signed a new kind of memorandum of understanding, a blueprint for how

Canada-Mexican relations would continue over the coming years. The trade mission we are seeing this week is a direct result of those meetings. You know, one of the big kind of marching orders from both the president and the prime minister was, you know, go forth and create business ties, go forth and, you know, really try to up both the investment relationship and that bilateral trade relationship. So there is a sense that the relationship has been put on more solid ground, but it is going to be tested in the coming months. The U.S. has made it pretty clear that they are interested as we head into the U.S.MCA negotiations to deal as much as they can bilaterally, Washington to Mexico City and Washington to Ottawa. Donald Trump doesn't like multilateral deals. He likes dealing one-on-one with other leaders.

The idea of, you know, getting together as a group and sitting around the table, you know, that's a It's not Donald Trump's thing. So one of the kind of big questions and concerns is how much as we head towards this July 1st kind of deadline for the USMCA review, how much are those talks going to remain trilateral? How much are they going to be bilateral? Dominic LeBlanc, who was meeting with Shane Baum and his Mexican counterpart, Marcelo E. Brad, this week, he gave a press conference on Wednesday. And he said, you know, both Canada and Mexico are absolutely committed to a trilateral negotiation. We absolutely want to end up at the end of this process with a trilateral deal. But, you know, we acknowledge there are plenty of issues which they're going to have to deal with bilaterally with the Americans.

At the end of the day, Mexico has a different set of interests and a different set of issues that it has to deal with Washington. And we have a different set of issues we're dealing with as well. Yeah. So as you mentioned, yeah, President Donald Trump has floated. the idea of replacing USMCA with separate bilateral deals between, you know, U.S. and Canada, between U.S. and Mexico. And I'm curious, it does sound like Canada and Mexico are committed to this trilateral deal of the U.S.MCA and renegotiating that. But with this idea of bilateral deals from the U.S. in the air, have Mexico and Canada talked about making their own bilateral deal between Mexico and Canada? So publicly the answer is no.

LeBlanc was asked on Wednesday. Is there a fallback plan if the U.S. walks away from the U.S.MCA? And he said, no, there is no fallback plan. The reality is if the U.S. was to pull out, we would still be governed by the agreement, the U.S.MCA. We also are part of the comprehensive and progressive agreement on trans-Pacific partnership, CPP, which is this big trade agreement covering the kind of Pacific countries. So that, again, that governs trade between Canada and Mexico as well. So if the U.S.MCA were to, for whatever reason, collapse into a set of bilateral deals, between Washington and the two countries,

we would still have agreements in place with Mexico. Okay, so what do we know about how the U.S. views Mexico in this trilateral deal? What are the sticking points between the U.S. in Mexico? So it's so interesting because if you talk to any trade experts two years ago, they would say the U.S.'s principal concerns around U.S.MCA are with Mexico. They're not with Canada. You know, there are these longstanding issues the U.S. has with Canada. It doesn't like how we do our dairy supply management.

It certainly doesn't like our online streaming rules. And more recently, there's things it doesn't like, like the fact that the LCPO isn't stocking Kentucky Bourbon. But the deeper kind of structural issues with the agreement have tended to focus more in Mexico. And that is things like the fact that Mexican labor is significantly cheaper than U.S. and Canadian labor. And so a big part of the 2018 negotiations were around, you know, making sure that a certain portion of an automobile, if it was going to trade tariff free, was made by labor that was paid at least $16 an hour. Again, the goal was to try to raise wages in Mexico to make it more competitive for Canada and the U.S. Right, because companies would be sending, you know, work to Mexico because it's cheaper to pay people there. Correct.

And a big innovation in the 2018 was this called Labor Rapid Response, which is basically a way in which Canada and the United States could launch complaints about labor law violations in Mexico. Again, the goal trying to allow U.S. and Canadian workers to be competitive with Mexican workers. There's also deep concerns in Washington about what is often referred to as transshipment of Chinese products through Mexico into the North American economy. So back during the first Trump term, when he put all these tariffs on Chinese goods, you saw pretty much in lockstep a huge spike in Chinese exports to Mexico and then a huge spike in Mexican exports into the U.S. Now, there was a bunch of different things going on, but the big concern in Washington was basically that Chinese products were being routed through Mexico, entering into the North American supply chains, essentially getting the tariff-free access that they have under the NAFTA or USMCA. And so that has been an ongoing and significant concern. Mexico was taken a number of steps over the last, call it six or eight months, to try to address some of those concerns.

It raised tariffs on something like 1,400 products from countries it doesn't have a free trade agreement with. That was targeting China, basically. I mean, it was targeting other Asian countries in particular, but the big target of that was China. So Mexico City does seem to be kind of getting the memo from Washington that it wants to take this concerns about Chinese trendship and more seriously. Mexico doesn't have a functional foreign investment screening mechanism. So that basically is like when a Chinese company wants to come and invest by a factory or a mine in Canada or the U.S., it has to go through a quite rigorous process to ensure that, you know, it is not in an economically sensitive sector. all of these kind of things. Mexico does not have that same kind of screening process in place.

It is developing one right now. And that was clearly going to be one of the big asks in the USMCA talks. So there are all of these issues. So it's kind of funny, the issue set of concern from Washington's perspective, has tended to focus on Mexico, not Canada, but they seem to be dealing much better with Mexico than they are with Canada right now. Claudia Shanebaum has been less critical of Donald Trump publicly. Mark Carney, by contrast,

is going to Davos and making speeches about, you know, the U.S. hegemon and a new world order. Yeah, tell me about why Shane Baum is kind of taking this different approach, right? Because Canada on the world stage, as you mentioned, Davos speech with Mark Carney, we have some strong words, right? But Shanebaum appears to be more warm compared to Mark Carney. Yeah, warm or you could say she's kind of cool as a cucumber. I mean, she's like, she hasn't reacted in the same kind of way to every Trump tweet. as politicians perhaps in Canada have. What's going on there?

I'm not sure. I mean, to a certain extent, Mexico is even more reliant on the U.S. economy than Canada is. I mean, it's kind of hard to believe. We are very reliant on the U.S. economy. But, you know, Mexico has these huge manufacturing sectors that are basically their, international companies are there so they can set up and sell into the U.S. So there is a massive amount at stake economically. There is also a lot at stake from a security perspective in Mexico.

So, you know, we don't like the 51st state rhetoric here in Canada. The Greenland stuff freaked us out in January. But like, do we actually expect the Americans are going to turn around and invade? I don't know. Maybe they will, but it's not, you know, top of everybody's list. In Mexico, the prospect of American troops or agents crossing the border to deal with drug cartels is very real. It's very, very real. And that's an absolute red line for Mexico.

They, you know, they do not want American troops coming in. into Mexico. There's a history of this in the 20th century. America has gone and invaded Mexico in the 19th century. It was operated in Mexico in the 20th century as well. They're very sensitive to these things. And the security issues that Mexico is dealing with with the United States are in a sense of a magnitude more complicated than what we're dealing with in Canada. And so that could be another reason why Shane Baum has taken, again, this more conciliatory approach to Washington than Mark Carney has. It's also just a different politics, right? Like Carney was a elected after Trump came into power, Carney rode anti-Trump sentiment in Canada all the way to

the prime minister's office. Shanebaum was elected before Trump came into office, right? So the politics around nationalism, anti-Trump sentiment are just different in the two countries. Yeah, that's fascinating. Really, really interesting context there. So we talked about what Washington wants from Canada and Mexico separately. But what are the three countries going to be talking about together when it comes to renegotiating

USMCA? So the big thing is probably going to be around what are called rules of origin. So that's the rules written into the trade agreement that say X amount of a product needs to come from Canada, Mexico or the U.S. in order to trade tariff free. Last time around in 2018, the U.S. was really pushing when it came to automobiles. They wanted like a certain part of every car to be American made. Mexico and Canada didn't like that. They worked together to push back against that, basically where the three partners landed on, was instead of a U.S. specific content, they would all agree to just increase the amount of

North American content from about 62% of a vehicle, of a core of a vehicle, up to 75% of a core of a vehicle. The U.S. is signaled that it wants to tighten these rules of origin for a whole range of things outside of automobiles. There are already rules of origin for other things, but we can expect those rules to be tightened. That is a major ask from Washington. Washington also wants to see more alignment between the three countries on things like external tariffs on China, export controls, foreign direct investment screening. It's going to be really interesting to see how those discussions play out because, as we were saying earlier, Mexico has seemed more willing to align with the U.S. on things like tariffs on China. Canada, until very recently, was more than happy to align with the U.S. on tariffs on China. We did it on steel.

We did on EVs. But over the last two months, Ottawa has sent a signal that it wants to carve out its own path on some of these things and may not be quite so keen to align with Washington on external tariffs. So those are going to be some of the big things that are going to form the core of what's being debated in the coming months. So we've been seeing a lot of this movement towards decentering the United States, right? Not just from Canada, but from other countries as well. What would it look like to reimagine Canada's relationship with Mexico that kind of bypasses the U.S. U.S. That's a tall order.

We send something like $600 billion worth of exports to the U.S. We sent, as I said, off the top, $8 billion, $9 billion to Mexico. It's an absolute fraction. Mexico is like around 1% of our total exports. The U.S. is 70 to 75%. Orders of magnitude different. You know, a big part of what Carney is trying to do is try to incrementally get that reliance on the U.S. down and incrementally increase our exports.

to other countries. It's not like a switch you can flip off. It's not a switch we're ever going to be able to flip off. Like ultimately geography, language, culture, existing infrastructure ties all means we are going to be trading with the Americans primarily, you know, going forward. That's not going to change. But if you can over time, you know, build those business relationships, get the infrastructure in place, the transportation infrastructure in place to start moving Canadian products,

goods, services into other countries. You know, that over time is going to decrease your complete economic reliance on the United States. That's clearly a goal of the government. And what's really interesting is with this trade mission this week is, you know, you hear a lot of rhetoric about trade diversification. And the question is like, what does it actually mean on the ground? Like what physically is happening to try to boost this, you know, boost sales to other

countries? Well, it is things like building railways and ports and pipelines. but it's also things like getting companies, getting Canadian companies into foreign markets, having the Trade Commissioner Service go and make that handshake happen, have export development Canada provide the financing to these companies or provide the insurance to these companies so they can move products. So what's kind of cool this week with this trade mission is, you know, this is diversification theoretically.

I mean, we will see whether it results. Well, you know, you and I can talk in a year. We can look at the trade numbers and see if anything's actually moved on this relationship. but you need to be taking these tactile steps. You need to be actually making those business connections because trade does not happen between countries. It happens between companies. And those companies need to know each other.

They need to speak each other's language. And they need to be comfortable dealing with each other if you're going to actually see trade diversification happen. Mark, we'll leave it there. Thank you so much for coming back on the show. Thanks for having me. That was Mark Rendell, the Globe's Economics Reporter. That's it for today.

I'm Cheryl Sutherland. Our producers are Madeline White, Michal Stein, and Rachel Levy McLaughlin. Our editor is David Crosby. Adrian Chung is our senior producer, and Angela Pichenza is our executive editor. Thanks so much for listening.