U.S.-Mexico Trade Relations

The 119^th Congress is engaged in a range of legislative and oversight activities related to trade policy toward Mexico, which in 2025 was the largest U.S. trading partner in total trade (exports plus imports) of goods and services. Mexico's proximity to the United States and the extensive bilateral trade and investment relationship under the U.S.-Mexico-Canada Agreement (USMCA),also make it a focus of congressional attention. The United States shares strong trade and investment ties with Mexico; changes in economic conditions or bilateral commitments could have impacts on production patterns, investment, employment in both countries, as well as on regional economic competitiveness. Congress may consider whether, and if so how, to exercise its constitutional authority to shape U.S. trade policy with respect to Mexico, particularly regarding the July 2026 joint review of USMCA. In its oversight role, Congress may also assess economic cooperation with Mexico in areas of mutual interest, including supply chain resilience, regional economic competitiveness, and energy security.

U.S.-Mexico Trade

In 2024, Mexico surpassed Canada as the top U.S. trading partner in goods and services, and in 2025 maintained this position, with $976.1 billion in total goods and services trade (exports plus imports) with the United States.

Trade in Goods

Trade in goods between the United States and Mexico has increased exponentially since the North American Free Trade Agreement (NAFTA, the precursor to USMCA) entered into force in 1994, with U.S. imports from Mexico increasing faster than U.S. exports. The U.S. trade balance in goods with Mexico went from a surplus of $1.7 billion in 1993 (the year before NAFTA entered into force) to a deficit of $171.5 billion in 2025. In comparison, the 2025 U.S. trade deficit with China was $295.5 billion

Mexico was the top U.S. trading partner in goods in 2025, with total goods trade valued at $872.8 billion, followed by Canada and China. The United States is Mexico's largest trading partner, accounting for 60% ($752.0 billion) of Mexico's 2024 total trade in goods (latest data available). Historical data shows that Mexico relies heavily on the United States as an export market; about 80% of Mexico's exports are sold in the United States.

Mexico ranked second, after Canada, among markets for U.S. goods exports in 2025. U.S. goods exports to Mexico increased from $134.2 billion in 2006 to $337.9 billion in 2025, a 150% increase (Figure 1). U.S. goods exports included computer equipment ($34.6 billion), petroleum and coal products ($28.5 billion), motor vehicle parts ($24.8 billion), semiconductors and electronic components ($17.2 billion) and electrical equipment ($13.2 billion).

Figure 1. U.S.-Mexico Goods Trade 2006-2025 Current U.S. $ in billions

Source: U.S. Census Bureau, accessed on Trade Data Monitor.

Mexico ranked first among suppliers of U.S. goods imports in 2025, followed by China and Canada. Imports from Mexico increased from $198.2 billion in 2006 to $534.8 billion in 2025 (170% increase). Imports included computer equipment ($90.8 billion), motor vehicles ($84.4 billion), motor vehicle parts ($67.3 billion), electrical equipment ($30.0 billion), and medical instruments ($14.7 billion).

Services Trade

The United States had a surplus in services trade with Mexico of $5.3 billion in 2024 (latest available data), compared to a surplus of $2.8 billion in 2023. U.S. services exports to Mexico increased from $22.5 billion in 2006 to $50.4 billion in 2024, while imports increased from $15.6 billion to $45.1 billion during the same time period. Services trade largely consisted of travel, transportation, business, and financial services.

Bilateral Foreign Direct Investment

Foreign direct investment (FDI) is an integral part of the economic relationship between the United States and Mexico. After NAFTA implementation in 1994 and Mexico's unilateral liberalization of its restrictive foreign investment policies in the late 1980s and early 1990s, U.S. FDI in Mexico increased rapidly. Between 1999 and 2024 (latest data available), U.S. FDI in Mexico increased from $37.2 billion to $159.2 billion, an increase of 328%. The United States holds the largest stock of FDI in Mexico. Mexico's FDI in the United States increased from $3.0 billion in 1999 to $61.7 billion in 2024 (by ultimate beneficial owner). According to Mexican government data, the United States reportedly was the largest source of FDI flows to Mexico in 2025, accounting for 39% ($15.9 billion) of the total ($40.9 billion). Other top sources of FDI included Spain ($4.4 billion), Canada ($3.3 billion), the Netherlands ($2.4 billion), and Japan ($2.3 billion). China does not appear to be a major source of FDI inflows, accounting for about $710 million in 2024. FDI inflows to Mexico largely were driven by growth in the automotive and manufacturing sectors.

U.S.-Mexico Supply Chains

Some economists credit NAFTA/USMCA with strengthening the competitiveness of U.S. manufacturing industries, especially the U.S. auto industry, through the development of North American supply chains. A significant portion of merchandise trade between the United States and Mexico occurs in the context of production sharing, as manufacturers in each country work together to create goods. The flow of intermediate inputs produced in the United States and exported to Mexico and the return flow of finished products greatly increased manufacturing activity along the U.S.-Mexico border region. U.S. industries, including motor vehicles and electronics, all rely on inputs from Mexican manufacturers. In the auto sector, for example, there are multilayered connections between U.S. and Mexican suppliers and assembly points. An automobile produced in the United States, for example, can have thousands of parts that come from different U.S. states and various Mexican locations. The place of final assembly may have little bearing on where its components are made.

NAFTA and the USMCA

On July 1, 2020, USMCA replaced NAFTA. NAFTA included provisions on tariff and nontariff barrier elimination, customs procedures, technical barriers to trade, government procurement, foreign investment, services trade, temporary entry for business persons, intellectual property rights (IPR) protection, and dispute resolution.

USMCA retains most of NAFTA's provisions, while making notable changes to market access provisions for motor vehicles and agriculture products, rules on investment, government procurement, IPR, and on worker rights and the environment. New provisions on digital trade, state-owned enterprises, and currency misalignment are part of USMCA. Other provisions in areas on which Congress has focused attention include tighter rules of origin for motor vehicles, digital trade provisions, and updated provisions on worker rights.

USMCA maintains a state-to-state mechanism for dispute settlement, as well as a binational dispute settlement mechanism to review trade remedy disputes. It maintains an investor-state dispute settlement (ISDS) mechanism only between the United States and Mexico—intended to address disputes related to government contracts in oil, natural gas, power generation, infrastructure, and telecommunications sectors—which was a priority for U.S. investors in Mexico. It also maintains U.S.-Mexico ISDS in other sectors, provided the claimant exhausts national remedies first.

U.S. Tariff Policy

U.S. imports from Mexico are subject to a 10% tariff imposed under Section 122 of the Trade Act of 1974, effective February 24, 2026 for up to 150 days, with exceptions for goods that qualify for and claim USMCA rules of origin requirements. Certain U.S. imports from Mexico also are subject to tariffs of varying rates under Section 232 of the Trade Expansion Act of 1962, including imports of autos and auto parts, steel, aluminum, and copper. In February 2026, the Administration initiated two investigations under Section 301 of the Trade Act of 1974 into excess industrial capacity and the prohibition of imports of goods made with forced labor, which could result in additional tariffs on imports from Mexico.

Issues for Congress

Congress may monitor U.S.-Mexico trade policy and the overall bilateral economic relationship, especially as it relates to USMCA and U.S. economic interests. USMCA Article 34.7 states that signatories are to meet on the sixth anniversary of USMCA's entry into force to review the agreement and determine whether to continue the USMCA. The USMCA Implementation Act includes congressional consultation requirements. Members may consider whether and how to engage in such consultation, with what congressional priorities, and with what objectives. Some Members have indicated they view NAFTA/USMCA as vital for U.S. firms, workers and farmers, and beneficial to U.S. economic interests. Others have expressed concern over enforcement of the agreement on issues such as worker rights, investor-state dispute settlement, and auto rules of origin. Congress also may consider oversight of other U.S. issues with Mexico, including U.S. tariff policies and agricultural trade. Congress could consider whether to maintain, limit, or expand presidential authorities related to tariffs. Congress also could debate the role of tariffs on third party inputs in North American supply chains, including Mexican tariffs on manufactured goods from non-FTA partners, and monitor collaboration with Mexico in issues such as autos and semiconductors.