MEXICO CITY — U.S. and Mexican trade negotiators began a third round of bilateral talks in Mexico City. The discussions address revisions to the North American trade agreement and economic security concerns.

The Trump administration declined to extend the United States-Mexico-Canada Agreement (USMCA) on July 1, 2026. Officials announced the administration will not renew the pact in its current form. The three-day meeting excludes Canada from the immediate negotiations.

The bilateral sessions address technical details of trade in autos, steel, aluminum, agriculture, and labor. Negotiators also focus on economic security, defined by the U.S. Trade Representative (USTR) as raising regional trade protections to prevent China and other Asian countries from using Mexico or Canada to access the U.S. market on preferential terms.

President Trump imposed a series of tariffs on Mexico in the early months of 2025. He cited fentanyl trafficking and illegal immigration across the border as the primary justification for the measures. The U.S. levied 25 percent tariffs on Mexican exports that did not comply with the USMCA. Additional tariffs targeted Mexico’s auto, steel, and aluminum sectors regardless of origin status.

USTR Jamieson Greer lauded Mexico for its lack of retaliation to the U.S. tariffs. He praised the country's pragmatic approach to the ongoing negotiations. Greer stated that the growing trade deficit with Mexico remains a key concern for President Trump in considering the future of the trade deal.

Mexican exports to the U.S. reached $545 billion in 2025, according to US Census Bureau data. This figure represented a 5.8 percent increase compared to 2024. Servers displaced vehicles as the number one Mexican export to the U.S. for the first time. Exports of servers, classified under tariff code 8471.50, grew by 179 percent over the past year.

The surge in server exports follows a wave of US investment in data centers that began in late 2022 after the launch of ChatGPT. Firms producing data processing machines in Mexico include Celestica, Foxconn, Lenovo, Quanta, and Wistron. AI servers fall under Harmonized System code 8471.50.

Under current rules, the USMCA rule of origin for HS code 8471.50 disqualifies non-originating inputs only if they are classified under HS 8471.30, 8471.41, or 8471.49. These codes correspond to complete portable computers, desktop computers, or pre-assembled computer systems. Components such as motherboards with CPU and GPU chips, DRAM memory, power supply units, and chassis do not fall within the excluded subheadings for AI servers. Most products covered by the agreement comply with rules of origin through a change in tariff classification rather than specific regional value content requirements.

The U.S. is seeking stricter rules of origin, including higher regional value content (RVC) requirements, in the revision discussions. The USTR proposes requiring that 50 percent of the value of North American-built vehicles originate in the United States. This contrasts with the current requirement that Mexican vehicles and auto parts have 75 percent regional value content to qualify for USMCA benefits. An RVC requirement in the computer sector could encourage server producers in Mexico to source chips from semiconductor plants in Arizona and Texas.

The U.S. aims to reduce supply chain dependence on Asia, particularly China, and boost domestic manufacturing through these negotiations. The U.S. wants its North American partners to erect similar trade barriers to non-regional goods, including vehicles, auto parts, steel, aluminum, and other components. Chinese brands raised their market share in Mexico to 17 percent from 14 percent a year earlier.

Mexico’s Plan México aims to substitute imports from Asia, particularly China, with greater domestic value added. Mexico shares the Trump administration’s goal of bringing more manufacturing to North America, including to the U.S. said Roberto Lazzeri. Lazzeri serves as Mexico’s new ambassador to the U.S. and is a former investment banker and finance ministry official.

Mexico is expecting to reach a new USMCA deal by the end of 2026, Lazzeri said. The USMCA underpins nearly $1.6 trillion in annual trade and will wind down within 10 years unless the three countries agree on improvements. Industry groups have urged Trump to keep intact the trilateral structure and largely tariff-free access of the agreement.

Canadian Prime Minister Mark Carney stated that his government had made comprehensive proposals to resolve trade disputes with Washington. The Trump administration imposed tariffs on Canada over retaliatory tariffs on U.S. autos, steel, aluminum, and liquor, as well as high dairy tariffs. Claudia Sheinbaum Pardo is the President of Mexico.