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\tSolfium CEO Andres Friedman chose Mexico as a launch market due to a range of business advantages. Photo: Caitlin Cooper for The Logic\t<\/p>\n
On its face, the company\u2019s story exemplifies a potential that proponents of continental free trade saw three decades ago as the original North American Free Trade Agreement took effect\u2014a sign that not everything about the relationship must hinge on the economic behemoth at the centre of it. Friedman spoke to The Logic the day after Prime Minister Mark Carney and Mexican President Claudia Sheinbaum had rubbed elbows with business leaders from both countries at a reception just down the street, part of a visit by Carney meant to build on the two countries\u2019 economic partnership.<\/p>\n
Yet another unspoken point of that trip was heading off a spectre business and political leaders are starting to dread: a future where the United States abandons<\/a> the tripartite trade deal, leaving its two partners to their own devices. Because, while Canada and Mexico say they have a lot to gain from each other, they have much more to lose from the United States.<\/p>\n Friedman, for one, was quick to point out that his own firm remains an exception that proves a rule: \u201cThe beaten path is for tech companies in Canada, or many companies in Canada, to grow in Canada and then go to the U.S.,\u201d he said. \u201cWe\u2019re the weird ones that skipped the U.S. and went straight to Mexico.\u201d<\/p>\n The trading relationship between Canada and Mexico has always been the weakest side of the North American triangle, as the economies of both countries are linked to the supply-and-demand rhythm of the superpower between them. That dynamic is now at risk. U.S. President Donald Trump made both Canada and Mexico early targets<\/a> of his global trade war, slapping steep universal tariffs on both that he linked to fentanyl. A carve-out<\/a> for goods that comply with the United States-Mexico-Canada Agreement (USMCA) has shielded their respective economies from the full force of the tariffs. The U.S. effective tariff rates on Canada and Mexico are among the lowest in the world, but there is growing anxiety over what is expected to be a contentious review<\/a> next year.<\/p>\n \t\t\t\t\tRelated Articles<\/p>\n \t \t Not that it will be smooth sailing until then. Last Friday, and not<\/a> for the first time, Trump abruptly halted<\/a> trade talks with Canada\u2014this time in apparent anger over Ontario Premier Doug Ford\u2019s U.S.-based ad campaign featuring excerpts of an anti-protectionist radio address by late president Ronald Reagan. The next day, Trump threatened to increase tariffs on Canadian goods by another 10 per cent, having already hiked the fentanyl-related tariffs on Canada from 25 to 35 per cent in August.<\/p>\n Mexico, for its part, was facing an increase to 30 per cent by the end of this week, though Sheinbaum said<\/a> Monday that Trump agreed to hold off \u201ca few more weeks\u201d to keep talking. Meanwhile, the U.S. Supreme Court is set to hear arguments next week over whether Trump had the authority to impose those tariffs to begin with.<\/p>\n The chaos has pushed political and business leaders in both Canada and Mexico to find ways to strengthen<\/a> their ties as part of efforts to deepen integration and diversify trade beyond the U.S. That renewed sense of common mission is what brought Carney to the Palacio Nacional in Mexico City last month, where he joined<\/a> Sheinbaum beneath the arches of the Treasury Room to announce a joint three-year \u201caction plan<\/a>\u201d on everything from energy corridors to innovation, plus a trade mission<\/a> taking place next February.<\/p>\n \u201cNorth America is the economic envy of the world,\u201d Carney said Sept. 18, who pointedly told journalists that Canada has no plans to cut Mexico out of the trilateral deal. \u201cIt\u2019s the most competitive economic region of the world, and part of the reason for that is the co-operation between Canada and Mexico\u2014both of us\u2014and the United States.\u201d<\/p>\n There were only two leaders onstage, but the presence of a third loomed large. Having learned just how much the USMCA can protect them from economic harm, Carney and Sheinbaum were intent on doing whatever they could to keep it going.<\/p>\n \t\t \tThe Port of Manzanillo, on Mexico\u2019s Pacific coast; Canadian exports to Mexico have grown little since the North American trade deal came into force. Photo: Shutterstock\/J. Romero\t<\/p>\n Canada sold about $9.4 billion worth of goods to Mexico in 2024, which made up just over one per cent of its total exports. In the other direction, Canada received $29.4 billion in goods from Mexico last year, which was less than four per cent of total imports. In 1997, three years after NAFTA came into force, Canada exported about 0.7 per cent of its goods to Mexico, while the country made up 1.5 per cent of its total imports.<\/p>\n The merchandise figures are only part of the story. Total Canadian investments in Mexico amounted to $57 billion last year, which includes about $46 billion in direct investment. In 2023, there was nearly $114 billion worth of assets held by Canadian majority-owned affiliates in Mexico.<\/p>\n \u201cTrade between the nations has been modest,\u201d said Keith Creel, CEO of Canadian Pacific Kansas City (CPKC), a continent-wide freight railway network, said earlier this month at a summit on Canada-U.S. relations in Toronto. \u201cWe\u2019ve been seized with America. We\u2019re always going to be seized with America,\u201d he added, but now Canada and Mexico \u201csee each other in a way they\u2019ve never seen each other before.\u201d<\/p>\n \u201cThe beaten path is for companies to grow in Canada and then go to the U.S. We\u2019re the weird ones that went straight to Mexico.\u201d<\/p>\n That shift in perspective has become increasingly important to CKPC, which formed in 2023 following Canadian Pacific\u2019s US$31-billion takeover of Kansas City Southern. The goal was to have its 32,000 kilometres of routes across all three countries benefit from increasing North American integration, but Creel has spent much of this year spinning the trade crisis as an opportunity to create a \u201cland bridge<\/a>\u201d between Canada and Mexico that allows goods to move directly from one country to another, bypassing U.S. tariffs along the way.\u00a0<\/p>\n During his visit, Carney joined him for a tour<\/a> of a CKPC rail yard in Mexico City, where they watched the delivery of wheat grown in Manitoba. In a somewhat awkward visual meant to illustrate the potential range of the bilateral relationship, the prime minister went to a table set up in the rail yard and broke off a piece of a bun he said was made at a local bakery that could use flour from Canadian wheat. To ensure no one missed the point, the buns were in baskets lined with paper featuring red maple leaves.<\/p>\n Other signs of Canadian business activity in Mexico are more subtle. A stroll through Polanco, an upscale neighbourhood known for its luxury boutiques, tree-lined streets and restaurant patios, reveals well-known foreign brands\u2014including German sportswear giant Adidas and British cosmetics retailer Lush\u2014located alongside local storefronts.<\/p>\n Lululemon set up its first showroom in Mexico in this neighbourhood in 2017. The Vancouver-based athleisure retailer now operates 26 locations in the country. The manufacturing sector is a substantial force in the Mexican economy, contributing about 21 per cent of to its GDP in the second quarter of 2025, but Lululemon is there to sell wares, not make them. Last December, the company said it sourced less than half a per cent of its materials from Mexico. As of April, Mexico was not on its list of active suppliers. It might be true that Mexicans don\u2019t drink Molson, per the title of a book<\/a> about Canadian businesses\u2019 struggles to compete abroad. But they are buying Canadian yoga pants.<\/p>\n While extreme poverty has hovered around seven per cent, Mexico has a growing consumer class. In 2024, its national statistics agency categorized about one-third of its population as \u201cno pobre y no vulnerable\u201d (not poor or vulnerable), compared to about one quarter in 2020. That \u201cmiddle class\u201d amounts to more than 42 million people\u2014the entire population of Canada and then some.<\/p>\n \t\t \tPrime Minister Mark Carney watched a CPKC train unload Canadian grain at a rail yard in Mexico City. Photo: The Canadian Press\/Adrian Wyld\t<\/p>\n There is a Scotiabank branch on the corner down the street from the Lululemon boutique\u2014one of more than 600 in the country. \u201cMexico is a key engine for growth around our [global banking and markets] business. No secret,\u201d Francisco Aristeguieta, Scotiabank\u2019s head of international banking, said Aug. 26 during a third-quarter earnings call. CEO Scott Thomson has stressed, however, that Mexico is a smaller player in Scotiabank\u2019s capital allocation strategy for North America. \u201cCanada first, U.S. second, Mexico third,\u201d he said at a recent summit hosted by the bank.<\/p>\n Emilio Cadena, chief executive of Prodensa, which helps foreign investors set up and grow manufacturing operations in Mexico, wrote an open letter<\/a> to Carney earlier this year on what his country could offer Canada\u2014beyond preferential access to the U.S. market through the USMCA. What Mexico needs in return, he wrote, is for Canada to view it as a trusted partner. <\/p>\n In an interview, Cadena said he wants to see all three North American countries work together to impose tariffs on foreign-made goods that compete with those produced within the continent, while developing critical supply chains in the region for those they source overseas. There is only so much Canada and Mexico could do on their own, he said. \u201cWe need to realize that we need the Americans [at] the table.\u201d<\/p>\n \u201cFar from routine, the review could become a high-stakes moment that determines whether the USMCA endures, unravels or evolves.\u201d<\/p>\n Diego Marroqu\u00edn Bitar, a fellow in the Americas Program at the Center for Strategic and International Studies in Washington, D.C., predicts the USMCA review, which he said was meant to be a \u201chealth check,\u201d will morph into a full-blown renegotiation that will revisit hot topics such as rules of origin, which determine how much of a good must come from North America to qualify for preferential tariff treatment. \u201cFar from routine, the review could become a high-stakes moment that determines whether the USMCA endures, unravels or evolves,\u201d he wrote<\/a> last month.\u00a0<\/p>\n The stakes are high because Trump seems less than committed to the deal. When he first sat down with Carney in the Oval Office in May, the president mused<\/a> that the USMCA might not be \u201cnecessary anymore,\u201d and that an outcome of the review could be to \u201cadjust it or terminate it.\u201d Dominic LeBlanc, the minister responsible for Canada-U.S. trade, told reporters in Mexico City last month that he viewed the U.S. launching formal consultations ahead of the review, which involves Congress, as a \u201cpositive sign,\u201d noting they \u201cdidn\u2019t do a more dramatic gesture.\u201d\u00a0<\/p>\n Marroqu\u00edn Bitar suspects the most likely result is a period of annual reviews\u2014potentially for a decade. Under the terms of the agreement, this could happen if at least one of the three countries decides against renewing the pact until 2042, but does not go so far as to completely withdraw from it.<\/p>\n \u201cThe relation between [the] three countries is just too complex,\u201d he said in an interview. The list of trade irritants is also long. \u201cI don\u2019t think there\u2019s going to be enough time to find solutions or compromises to every item on the agenda before July 1, 2026.\u201d Indeed, he said, it might benefit Canada and Mexico to see whether the political situation in the U.S. changes, rather than each of them making major concessions to get Trump to renew the USMCA next year.\u00a0<\/p>\n Odracir Barquera, director general of the Asociaci\u00f3n Mexicana de la Industria Automotriz (AMIA), which represents the Mexican automotive industry, said in an interview that it is crucial that Canada and Mexico get on the same page. \u201cI think the priority for the review is that all three countries can agree on the fact that we need to further our integration in order to be able to keep the competitiveness of the region versus the rest of the world.\u201d<\/p>\n Maintaining that sense of shared purpose has not always been easy.<\/p>\n Shortly after Trump won the election last November, Ontario Premier Doug Ford and Alberta Premier Danielle Smith suggested<\/a> Canada should seek a bilateral deal with the U.S. Ford went so far as to call Mexico a \u201cback door\u201d for Chinese imports, especially in the auto sector, and then-finance minister Chrystia Freeland said<\/a> she shared those concerns. So did then-prime minister Justin Trudeau\u2014even after Sheinbaum publicly called on Canada not to cut Mexico out of the deal.<\/p>\n Barquera, who got the chance to speak to Carney at the reception in Mexico City, said those fears were misguided. There are no Chinese auto production plants in Mexico. The one factory that assembles Chinese vehicles is a joint venture operated by Mexico\u2019s Giant Motors, which assembles JAC brand autos for the domestic market from imported parts and is a relatively small player, he said. (Last November, Sheinbaum acknowledged<\/a> Trudeau\u2019s concern about reports that Chinese company BYD, which makes electric vehicles, was planning to build a plant in Mexico. She said she told him the only BYD plant on the continent was in California.)<\/p>\n
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