Mexico’s Exports to Canada Surge 20.2% Amid US Trade Feud

Data from Banco de México indicates that while the United States remains the dominant supplier to the Canadian market, its growth trajectory has nearly stalled. According to figures from the US Census Bureau, US exports to Canada edged up by 1.9%, rising from US$172.617 billion to US$175.826 billion over the first half of the year.

Although US sales to Canada remain more than 14 times larger than Mexico’s total trade volume with the nation, Mexican exports grew at a pace more than ten times faster than those of its North American neighbor during the same six-month window.

Trade Frictions Alter North American Flows

The divergence in export growth follows more than a year of diplomatic and commercial friction between Washington and Ottawa, triggered by the return of US President Donald Trump to the White House.

The two trade partners under the Agreement between the United States of America, the United States of Mexico, and Canada (USMCA) responded differently to US trade policies. Mexico chose a strategy of direct negotiation, successfully avoiding immediate retaliatory tariffs.

In contrast, Canada instituted retaliatory duties of 25% on a wide range of US goods in March 2025, targeting steel, aluminum, tools, computers, servers, and monitors, while explicitly excluding Mexican-origin merchandise.

Initial shifts in Canadian procurement emerged throughout 2025, when Canadian imports of US goods declined by 3%, representing a contraction of CA$14.6 billion.

Concurrently, Canadian purchases from Mexico grew by 19.6%.

The State of Trade 2026 report, published by the Office of the Chief Economist at Global Affairs Canada, highlights that the pullback in US imports was driven by a combination of Washington’s tariff policies, Ottawa’s countermeasures, and operational challenges within the automotive sector.

During the same period, total Canadian imports of goods and services from third-party nations grew by 11.2%.

The report identified cargo vehicles, passenger automobiles, and data processing units as the primary product lines propelling Mexico’s market share gains.

Escalation and Breakdown of Bilateral Talks

Bilateral trade disputes widened under Canadian Prime Minister Mark Carney.

In July 2026, the Trump administration announced plans to implement 50 percent tariffs on Canadian products, accusing Ottawa of maintaining discriminatory trade practices against US automotive vehicles, alcoholic beverages, and dairy products.

Efforts to negotiate a resolution ended on Aug.21, 2026, when Prime Minister Carney suspended formal negotiations.

Ottawa cited last-minute modifications made by US negotiators to the proposed terms, which Carney characterized as unfair, economically unviable, and harmful to the long-term predictability of cross-border agreements.

“The United States changed,” Carney declared when announcing the suspension, adding that Canada would not return to the economic relationship it had maintained for decades with its primary trade partner and promising a “dollar-for-dollar” response.

Canada’s next phase of retaliatory tariffs is scheduled to take effect on Sep.

8, 2026. These measures will impose duty rates of 15%, 25%, and 50% across CA$27.6 billion worth of US imports. Target categories include steel, aluminum, dairy, home appliances, agricultural machinery, paper, electronics, furniture, and apparel, while US motor vehicles will remain subject to pre-existing tariff measures.

Industry analysts note that these tariffs create a pricing advantage for Mexican manufacturers whose exports enter Canada without facing comparative duties.

Long-Term Growth Trajectory and Sector Breakdown

The recent acceleration in Mexican exports reflects an established upward trend that predates the recent tariff disputes, having been interrupted only by the broader economic contraction caused by the COVID-19 pandemic in 2020.

Mexican shipments to Canada totaled US$14.080 billion in 2018 and US$14.316 billion in 2019, before contracting by 22.2% to US$11.139 billion in 2020, the lowest point in the period analyzed.

Recovery accelerated in subsequent years, with exports rising to US$13.060 billion in 2021, US$15.586 billion in 2022, and surpassing US$18.000 billion in 2023. Sales reached US$18.906 billion in 2024 and hit a record high of US$22.1688 billion in 2025, representing a 17.3% year-over-year increase.

Between 2018 and 2025, total Mexican exports to Canada expanded by 57.5%, averaging an annual growth rate of approximately 6.7%.

Data for the first half of 2026 shows that expansion was heavily concentrated in the auto transport sector.

Shipments under the vehicles, tractors, and auto parts classification reached US$6.9828 billion during the six-month period, up 41.9% year-over-year.

The US$2.060 billion absolute growth in automotive sector exports was slightly higher than the overall US$2.058 billion net increase in total Mexican exports to Canada. This discrepancy is accounted for by declines in other product lines, which were offset by the automotive sector’s expansion. Automotive products currently represent 57% of all Mexican goods exported to Canada, up from 48.3% a year prior.

Long-term data shows automotive exports to Canada expanded from US$6.120 billion in 2018 to US$11.327 billion in 2025, representing a cumulative increase of 85%.

Other export chapters recorded notable growth during the first half of 2026, albeit from lower baseline totals.

Exports of electrical machinery, apparatus, and materials rose 16.3% to US$1.034 billion.

Precious stones and metals increased by 37.9% to US$434 million, furniture exports rose 13.6% to US$312 million, and plastics and related manufactures grew 44.5% to US$109 million.

Conversely, several sectors experienced contractions over the same period.

Sales of mechanical machinery, boilers, and appliances declined 31.9%, subtracting US$546 million from the export baseline.

Pharmaceutical product sales fell by 53.9%, optical and medical instruments dropped 70.4%, and fruit exports registered a 13.2% decrease.

Automotive Pressures and Regional Performance Context

Despite gains in the Canadian market, Mexican automotive manufacturers face headwinds due to US trade policies.

The United States enforces a 25% tariff on imported vehicles.

For units compliant with USMCA rules of origin, the tariff applies specifically to the non-US content incorporated into the vehicle.

These duties have placed measurable pressure on Mexican manufacturing volume.

Between January and July 2026, the value of Mexican automotive exports to the United States decreased by 1.8%. Over the same seven-month frame, total light vehicle exports from Mexico to all global destinations fell 0.3% to 1.95 million units.

The contraction deepened significantly in July, when light vehicle exports dropped 9.7% year-over-year, according to data from the INEGI.

During the seven-month period from January to July 2026, Canada received 247,069 Mexican-built light vehicles, accounting for 12.7% of Mexico’s total automotive exports.

The United States absorbed 75.9% of the total.

While the Canadian market remains smaller in absolute volume compared to the US, its growth provides an alternative destination for Mexican manufacturers amid shifting demand.

From a broader regional perspective, the Organization for Economic Co-operation and Development (OECD) reported that trade growth across North America exceeded the average performance of the Group of Twenty (G20) economies during the second quarter of 2026.

OECD data shows global merchandise trade among G20 nations accelerated in the second quarter, with overall import growth rising to 6.7%, up from 5.2% in the previous quarter.

Mexico reported positive trade performance across both flows, with second-quarter exports increasing by 12.2% and imports growing by 7.7%.

In the United States, second-quarter merchandise import growth accelerated to 7.8%, up from 6.0% in the prior quarter, driven primarily by increased purchases of computer systems and accessories.

However, US export growth slowed to 3.9%, despite higher energy prices boosting crude and petroleum shipments.

Canadian export growth reached 13.5% over the quarter, supported by shipments of energy products and motor vehicles, while import growth slowed.

In contrast, OECD data noted a slowdown in Chinese trade growth during the second quarter of 2026 following sharp increases in the first quarter, with export growth moderating to 4.7% and imports rising 8.9%, focused on mechanical, electrical, and high-tech components.

Japanese trade also slowed, while South Korean imports rose 11.6% on energy and semiconductor equipment purchases, alongside 19.3% export growth.

While cross-border disputes continue to restructure trade routes, tariffs placed on US goods have increasingly positioned Mexican producers as alternative suppliers for Canadian importers seeking to mitigate rising import costs.

Before you cross

Arrange Mexican auto insurance

Compare coverage before your trip and keep your policy documents with you.

Compare insurance options