Canada Scrambles to Repair Strained Ties with Mexico Amid Trade Turbulence and U.S. Tariffs

Canadian Prime Minister Mark Carney is urgently working to restore his country’s strained relationship with Mexico following a diplomatic breakdown that began late last year. The rupture was triggered by suggestions from Canadian officials that Ottawa might pursue a bilateral trade deal with the Trump administration—excluding Mexico.

In a conciliatory gesture, Carney reached out to Mexican President Claudia Sheinbaum during a July phone call, referencing a handcrafted indigenous soccer ball she had gifted him during their last meeting and expressing hope to visit Mexico soon. According to three individuals familiar with the exchange, the outreach signaled Canada's effort to repair the damage caused by a string of public slights—including a remark by Ontario Premier Doug Ford, who in November described comparisons between Canada and Mexico as “the most insulting thing I’ve ever heard.”

Canada and Mexico have long been economic allies, benefiting from over three decades of trilateral trade agreements with the United States—beginning with the North American Free Trade Agreement (NAFTA) in 1994 and continuing under its successor, the United States-Mexico-Canada Agreement (USMCA), established in 2020.

However, the relationship soured after then-Prime Minister Justin Trudeau floated the idea of a separate U.S.-Canada trade pact, citing closer alignment with Washington on strategic issues like China. Days later, Trudeau’s unexpected visit to Mar-a-Lago to meet with President Donald Trump further alarmed Mexican officials, leading President Sheinbaum to freeze bilateral engagements with Canada until Trudeau left office.

Now, nine months later, the geopolitical dynamic has shifted. President Trump has granted Mexico a 90-day reprieve from new tariffs, maintaining a 25% rate, while raising tariffs on Canadian goods to 35%. Canada, now diplomatically isolated, is trying to reestablish goodwill with Mexico and salvage the trilateral agreement it once appeared willing to abandon.

A Renewed Diplomatic Effort

Canadian officials are now engaged in a full-fledged diplomatic campaign to win back Mexico’s favor and preserve the USMCA, which continues to provide tariff protections for major exports from both countries. Speaking on Tuesday, Prime Minister Carney underscored the importance of the agreement, while Foreign Minister Anita Anand and Finance Minister Chrystia Freeland traveled to Mexico this week for high-level meetings.

“It is extremely important for Canada to have a resilient relationship with Mexico,” Anand told Reuters. “Indeed, I'm here to kick-start that relationship.”

Echoing the sentiment, President Sheinbaum posted on X (formerly Twitter): “We’re strengthening the relationship between our countries.” Her spokesperson, however, declined to comment further.

Old Wounds and Lingering Distrust

Trade analysts warn that failure to rebuild the partnership could undermine North American economic integration. “The big question I have is whether there's a real sense of communication or coordination between Mexico and Canada,” said Kenneth Smith Ramos, a former lead Mexican trade negotiator. “I don’t get the sense that is the case. Both are operating bilaterally with the U.S., and that’s it.”

Smith also noted that during the tense 2018 USMCA negotiations, it was Mexico that insisted Canada remain part of the deal despite growing U.S.-Canada tensions—a history that may explain Mexican resentment at being sidelined last year.

However, a Canadian official involved in those negotiations offered a starkly different account, accusing Mexico of cutting a separate deal with Washington and leaving Ottawa at a disadvantage. “If there are Mexicans who feel Canada betrayed them, they should look in the mirror,” the source said.

A Reset in Motion

Following Trudeau’s unsuccessful diplomatic overtures earlier this year, relations with the U.S. soured further, prompting Carney—who succeeded Trudeau in March—to pivot toward rebuilding trust with Mexico. He extended an invitation to President Sheinbaum to attend the G7 summit in Canada, which she accepted after a three-week delay. While President Trump left the summit early without meeting her, observers described her attendance as a symbolic reset.

“This sent a clear message that the two leaders are ‘in this together,’” said Pedro Casas, CEO of the American Chamber of Commerce of Mexico.

During a follow-up phone call in July, Carney informed Sheinbaum of Canada’s plan to impose limits on steel imports from certain countries to protect its domestic industry amid steep U.S. tariffs. Importantly, he assured her that the new restrictions would not apply to Mexican steel.

High Stakes for the Trilateral Framework

Despite past grievances, Sheinbaum remains committed to preserving the trilateral agreement. Failure to renew USMCA next year could result in its automatic expiration in 2036—an outcome that would severely impact Mexico’s export-driven economy.

According to a senior Mexican official, U.S. Secretary of Commerce Howard Lutnick has floated the idea of replacing USMCA with a bilateral U.S.-Mexico deal—a scenario Mexico is reportedly not eager to pursue. Neither Lutnick nor the White House responded to Reuters’ request for comment.

“Mexico knows very well that if we try to go head-to-head, toe-to-toe with Washington, the asymmetry in negotiations will always favor the U.S.,” said former trade official Juan Carlos Baker. “It’s always better to have a three-player game.”

As North America braces for a new phase in its trade dynamics, the success or failure of Carney’s diplomatic outreach will play a crucial role in shaping the region’s economic future—impacting industries from automotive manufacturing to pharmaceuticals and beyond.