USMCA Review Is A Risk for Mexico

It is not a credible threat for the U . S . to withdraw from the USMCA. However, it is credible for the U . S . to slow down the approval process somewhat. There will be a cost for the US if it decides to withdraw from the agreement, as the total value of trade in North America as a result of the USMCA is $ 1.5 trillion. More specifically, Mexico plays an important role in the supply chain of several US companies. Take, for example, the big three US automakers: Ford, GM and Stellantis . We estimate that about 20-30% of the cars sold in the US are made in Mexico. If the US suddenly made it impossible to import these vehicles from Mexico, these companies would take a significant hit. In addition, a policy of raising tariffs across the board will cause inflation to rise and output to fall. However, a credible threat from the US could include a delay in the ratification of the USMCA. This delay could put undue pressure on the MXN and prospects for future FDI. The U . S . will see k , and probably extract, concessions on limiting Chinese FDI in Mexico and securing help from its southern neighbor to limit the flow of illegal immigrants and fentanyl. Finally, we believe the U . S . will be very careful that changes to Mexico's judicial reform don't disadvantage US companies.