China will not have a seat at the table when the first joint review of the United States-Mexico-Canada Agreement begins in July 2026. It may still be the country that shapes the outcome most. The pact that replaced NAFTA is officially about rules of origin and labor enforcement. In practice, Washington has turned it into a question about China: whether Mexico can keep serving as North America’s factory floor without becoming a side door for Chinese goods, parts and investment.
At the first joint review – set to begin July 1, the sixth anniversary of the USMCA’s entry into force – the three governments are expected to begin deciding whether the agreement can be extended for another 16 years, or whether the process will slide into a longer period of annual reviews. If they cannot agree, the USMCA does not lapse at once; it would enter a stretch of annual reviews and expire in 2036.
U.S. Trade Representative Jamieson Greer told Congress in December that a rubberstamp extension would not serve the national interest, and pressed for structural change first.
Washington has been open about its main concern: the United States does not want Chinese firms using Mexico as a platform for duty-free access to the U.S. market. Greer put it bluntly at his confirmation hearing, warning against a setup in which a company could “build a factory in Mexico, assemble it with parts” from China and ship the result north tariff-free.
The review process has centered heavily on third-country content, rules of origin and economic security, with China looming over each debate. The stakes are high: Mexico is now the United States’ largest trading partner, with its share of U.S. goods imports having climbed to 15.5 percent in 2024. Mexico is trying to do two things at once: convince Washington that it is not a Chinese backdoor while keeping the Asian inputs that make its industry competitive.
Mexico has read the pressure and moved toward Washington’s position. In September, President Claudia Sheinbaum proposed steep tariff increases on imports from countries without a trade agreement with Mexico, a list that includes China but spares the United States, Canada, and Japan. Mexico’s Congress approved the package in December, and on January 1, 2026 Mexico imposed duties of up to 50 percent – the World Trade Organization ceiling – on Chinese cars and goods ranging from auto parts to steel. The measure touched roughly 8.6 percent of Mexican imports and was widely read as an effort to align Mexico with Washington before the review.
Months before that, Mexico had raised the tax on low-value parcels to 33.5 percent, aimed partly at Chinese e-commerce sites such as Shein and Temu. Beijing protested and urged Mexico to reverse the hikes.
But these efforts can only go so far. The factories that make Mexico indispensable to U.S. supply chains run on imported components, many of them Asian. The trade deficit with China captures that dependence: Chinese exports to Mexico reached nearly $130 billion in 2024 against about $10 billion flowing the other way, a record imbalance. Much of Mexico’s imports from China are intermediate goods that Mexican plants then turn into finished exports. Mexico did not build its export machine with purely North American parts. That is precisely why China’s shadow looms large over the USMCA review.
The balancing act is harder because Asia is not only China. Mexico’s fast-growing electronics exports to the United States lean on parts from South Korea, Taiwan, Japan, and, increasingly, Southeast Asia: Vietnam, Malaysia, and Thailand. The January tariffs caught several of those partners alongside China: South Korean, Indian, and Taiwanese suppliers were swept in. If the USMCA review tightens rules of origin or adds China-specific content limits, the restrictions would not stop at Chinese inputs; they would catch the wider web of Asian suppliers that North American manufacturing relies on.
Mexico is tied to the Pacific twice over, by agreement and by manufacturing. Mexico is a founding member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a free trade agreement linking it to Japan, Vietnam, Malaysia, Singapore, and Australia. Its supply chains bind it to Asian production in practice.
Washington is now asking Mexico to treat part of that same Pacific network as a security risk. The “fortress North America” language gaining ground in U.S. trade circles, and the transshipment penalties written into Washington’s 2025 deals with Asian partners, push the region toward exclusion just as Mexico can least afford to cut those ties.
The “Chinese backdoor” argument is more complicated than Washington’s rhetoric suggests. A Federal Reserve study published in June found that direct Chinese transshipment explains only about 1 percent of the growth in Mexican exports to the United States since the 2018-19 tariff war, with Chinese-owned production in Mexico adding about 14 percent. Chinese inputs accounted for just 2 to 3 percent of recent manufacturing export growth. Brookings found that North American value rose to about 74 percent of Mexico’s manufactured exports to the United States in 2024, and that Chinese exports to Mexico actually fell about 1 percent in 2025.
Greer himself credited Mexico with absorbing roughly a quarter of the reduction in the U.S. deficit with China. Yet the suspicion of large-scale rerouting drives policy anyway: in Washington, the perception of a backdoor has grown more powerful than its measured size. That gap between perception and evidence is what makes the USMCA review so difficult.
Mexico will need to build credible tools – clear rules of origin, traceability of inputs, tighter investment screening – that ease U.S. security concerns without strangling the supply chains that employ its workers. The cost of getting it wrong is already visible. BYD, the Chinese electric-vehicle giant, shelved its planned Mexican plant in July 2025, citing geopolitical pressure, before the project ever reached a final investment decision. The forces behind that retreat will now run through the USMCA review.
If Mexico can secure an extension while keeping its Pacific commitments and its non-Chinese Asian supply lines intact, it will have shown that North American discipline and trans-Pacific openness can coexist. If USMCA renewal instead requires Mexico to bend its external trade policy to the U.S. campaign to contain China, the review will mark the moment North America turned its trade bloc into an instrument of decoupling.
Either way, the review measures whether the region can grow more resilient without becoming a wall against Asia. Mexico is where that contradiction will be tested first.
