US – Mexico Relations are About to Change. Probably.

The 3 paths that Sheinbaum can take to the US, and what each means to you.

President Obrador Lopez (AMLO) ignored the US-Mexican Relationship whenever possible, but President Sheinbaum will not have that luxury.? Mexico may not care about geopolitics – but geopolitics cares about Mexico.? ??

End of the Story:? The Sheinbaum administration will find both opportunity and risk across the Northern border, but unlike her predecessor, Sheinbaum will not be able to avoid and deflect hard decisions.? A Biden win will give her and her team a lot of options, but the risks remain.? If Trump comes back, however, US-Mexican relations will suffer as MAGA populists look for fast, decisive solutions to complicated problems.?? Sheinbaum - and all of us - need to take the temperature of US relationships, and figure out how to manage for tougher times.??

Sheinbaum is comfortable with California and NY, but she would be wise to build ties in Texas – starting with Houston. ??In the Trump II narrative, Mexico is one of the bad guys.? A few friendly old boys with big Texas hats and big Mexican factories could act as an important buffer.? That kind of thing will work for you, too.? ???

There are three possible paths for Mexico and US relations over the next 4 years.

We are now waiting for November and the US Presidential elections.? ?A Biden win will maintain the status quo on the border – but that’s a mixed picture.? More interesting, however, is the prospects of a Trump win.? The MAGA wing of the Republican party holds Mexico responsible for 3 big US problems – illegal immigration (we’ll be saying it that way again), fentanyl & other drugs (there’s a new one: Xylazine), and Cartels.?? These are the people who lament missing their “big chance” to build the wall and fix the border the first time, and they aren’t going to let it happen again.? ?

Another wild card is the level of independence, ambition, and pragmatism driving Claudia Sheinbaum.? If she follows the AMLO template, relations with the US will be sparse, terse, and stilted – which is fine for basic business, but limiting.? Our rules and regs are already in place, and they work just fine.? She may, however, decide that the potential for a “special relationship” status with Washington is too good to pass up (or she just wants to put some distance between herself and AMLO). ??In a second Biden administration, she may take on the role of co-equal partner in the North American Trade Bloc.

The big test for Sheinbaum and the entire North American Trade Bloc concept comes in July 2026 when the USMCA is up for review by all 3 signatories.? This agreement has been significant and successful for everyone – especially Mexico.? A clean approval would be best for Sheinbaum.? Mild changes are to be expected (look for additional national security provisions, and maybe an expanded clause 32.10, preventing high-level deals with non-market entities (i.e.: China)), as long as the key functionality of preferred access to the US is preserved.

Option 1:? Biden Wins, Sheinbaum maintains the status quo.?????

The new Sheinbaum administration remains passive in terms of relations with the US, ceding control and strategic direction to the US admin and leading corporates.

Outcome:? More of the same.? This is mildly positive.? The Sheinbaum cabinet selection is supposed to be about continuity – but it’s almost completely optimized for the old-style Democratic Party.? The Sheinbaum and Biden people are likely to have some lovely brunches together and will share many progressive war stories, but I wouldn’t expect a flurry of activity or key reforms. Biden’s first administration was not laser-focused on the border nor on finding new ways to enhance cross-border trade.? That will continue.???

?The North American Trade Bloc will continue to be shaped by MNCs, with the addition of China.? Disputes with the US will be handled on an ad-hoc basis, managing each crisis as it bubbles up the list of priorities.

What this means to you:? This is the most likely scenario if Biden wins in November.? Continuity, indeed.? For MNCs that can build or adjust their own infrastructure, this is the best-case scenario because nothing will change.? The roads won’t get better and the security picture will remain sub-optimal – but there probably won’t be new regulations or restrictions.?

In this scenario, Chinese FDI continues unabated, and the US will manage its trade preferences through the Entities List and the application of new and existing regs.?

Option 2:? Biden Wins, Sheinbaum Proactive.

Sheinbaum is a scientist who knows how to operate a spreadsheet.?? The US is Mexico’s most significant customer by a long shot, its main investor, and the main provider of jobs.? While AMLO didn’t make good relations with the US a priority, Sheinbaum may take a more active role.? She has the experience, the language skills, and the resume to deal with the Biden Admin.? She can take a proactive role and shape a Mexican agenda that will address the 3 big issues that the US has with Mexico – immigration, fentanyl, and security.

The new Sheinbaum cabinet shares common ground with the Biden team, but the new President will have to break tradition if she wants to forge a new relationship with the US.? LatAm progressives (with includes both AMLO and Sheinbaum) generally like to posture as “moderate to extreme anti-American”.??? While this worked for AMLO and enhanced his popularity, the result for Mexican trade was that decisions were made ABOUT Mexican trade by others - not BY Mexico.? First, it was NAFTA/USMCA negotiating sessions, then corporate boards, and, going forward, China’s Ministry of Commerce (MOFCOM).?

An ambitious Sheinbaum may view a second Biden administration as a unique opportunity to reshape the US-Mexican relationship and further her social justice agenda as well.? While AMLO tried to bolster his international status by acting as the leader of LatAm progressives, Sheinbaum may see more opportunities with a Biden administration that just never seemed comfortable making decisions about border security or trade issues.?

Under both of these scenarios, USMCA in 2026 is green-lit fairly easily.??????????????????????????????????????????????????????????????????????????????????

Option 3:? Trump Wins, Sheinbaum on Defense

The Mexican business media routinely overestimates the health of the US-Mexican relationship.? Is the Mexican economic relationship important to the interests of the US?? Sure.?? But while the vast majority of Americans feel respect and affection for Mexico, Trump's border security team is not among them.? Conservatives in Congress and on the grassroots level see Mexico intertwined with fentanyl, other drugs & drug violence, illegal immigration and the associated risks of terrorism), and cartels.??

The Conservative version of “intersectionality” is a range of groups wanting different types of military action in Mexico for fentanyl, border security, AND/OR Cartels.? The AMLO admin (including then Foreign Secretary Marcelo Ebrard, who will be the new Secretary of Economy) were somewhat successful in the first Trump administration, but they will find the sequel to be even bolder and more reckless. Bombing Mexico (or other unilateral military action) has become a mainstream idea among conservatives.

The prospects of a renewed USMCA are much diminished under Trump.? It will likely happen, but contain stronger anti-China language and more national security carve-outs.?

What this means to you.

Cross-border trade between Mexico and the US is still looking like a safe bet – but within a much riskier framework.? The system will continue to work just fine until it stops completely.? ??

A Biden win will signal a modified status quo for cross-border trade.? There won’t be any new policies or progress on any solutions – but there will be more human rights crises, safety crises, and fentanyl crises.? The Biden admin doesn’t make policy – they have a priority list of crises that they are willing to address.???

A Trump victory stands a better chance of disrupting trade routes as unilateral security decisions by any manner of populist raise compliance costs and threaten to shut down roads and bridges.?

3 Solutions:

So, what is President Sheinbaum going to do?? The same thing that you will, if you are smart.? Hope for the best – plan for the worst.? You should start doing both in Texas – preferably Houston.?

1.?????? Grandfather that supply chain.? Americans looking at Mexico should build their functional relationships BEFORE November.? Partners, suppliers, service providers -- this is the time to sign your deals and bullet-proof your supply chains.? Hopefully, 2025 won’t bring any big disruptions to the US-Mexico trade relationship, but these are uncertain times. Anything you can do for the remainder of 2024 will help down the line—regardless of who wins. ?

2.?????? Relationships on both sides of the border.? American managers had much broader networks of connections in China than they do in Mexico.? In Mexico, we tend to meet a few key people early and then kind of coast on their abilities.? That’s fine if you want to extend the status quo, but if you are deepening your ties in North America then you need to revisit your networking routines.? As rules change and border crossing becomes less reliable, you’ll need a wider range of potential solutions.? In Mexico, rules may change but relationships don’t.? In normal times, your top Mexican managers could be relied on to manage all of your relationships and connections.? At this moment in time, however, we may find ourselves in new territory and uncharted waters at a moment’s notice.? It’s best to have even more options available than usual.?

3.?????? Houston.? This started as my answer to Sheinbaum’s potential Trump troubles, but it works even better for international managers.? Nearshorers are so focused on site selection in Mexico that they are overlooking an equally important real-estate question.? What’s the best US city for you??? If you’re a famous US brand bringing the same types of products, components, and materials across the border that you’ve been doing for years, then you don’t have to worry about this issue too much.? Your logistics & operations team already have a Texas presence well in hand.? It's just as important to have a strong local network in the US as it is in Mexico. ?

Final Word:

Through pandemics and trade war, US-Mexican economic relations seemed rock-solid. The presidential elections in November have the potential to up-end important relationships, however, and this is one of them.? Mexico’s new president should be focusing on the USMCA/T-MEC review in July 2026.? As long as the agreement holds, international managers will be OK.? If the renewal gets derailed by populist politics in the US, it puts the whole concept of nearshoring to Mexico in question.

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Next:? The China FDI question.? ?

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