Despite numerous criticisms and concerns, the judicial reform promoted by Andrés Manuel López Obrador was enacted and is here to stay. In addition to its troubling domestic implications – particularly regarding the erosion of the separation of powers – the new law casts a shadow over the bilateral relationship between Mexico and the United States, presenting a significant and immediate challenge for President Claudia Sheinbaum.
It won’t be an easy start. The prospect of judicial reform has already led US companies to freeze nearly $35 billion in investment projects, while Ken Salazar, US ambassador to Mexico, expressed concern about the potential negative impact on bilateral trade that amounts to to 807 billion dollars annually. International and local banks warned about the possible adverse effects on investments in the country and the Mexican economy in general. Underlying these expressions is the fear that the reform could be a burden on relations between Mexico and its neighbor at the beginning of Sheinbaum’s mandate. To this we should add López Obrador’s decision, last August, to “pause” relations with the US embassy, an ambiguous maneuver that, although it has no formal diplomatic implications, shows that there are deep tensions.
For Sheinbaum, steering Mexico through these turbulent waters is not just a matter of governance, but an urgent necessity. Inheriting a bilateral relationship plagued by uncertainty, he will need to take clear and decisive actions early in his term to preserve economic stability and Mexico’s role as a vital and reliable trading partner; The success of his administration will depend largely on it.
Although it is not a renegotiation, the review of the T-MEC scheduled for 2026 adds complexity. The legal uncertainty derived from the new judicial system, which could be at the mercy of internal political maneuvers, collides with the trilateral trade agreement. Equally worrying are other pending constitutional reforms, such as the dissolution of autonomous bodies, which threaten to further erode Mexico’s democratic path.
Of course, there are also tensions that come from the other side of the border. Nationalist rhetoric in presidential campaigns in the United States indicates a change in the country’s trade policy. Both the Republican and Democratic candidates have shown leanings toward protectionism, which could impact the trade and investment environment. Vice President Kamala Harris, who as a senator voted against the approval of the USMCA, recently noted on the social network X that she had voted against it because she knew that the agreement was not enough to protect the United States and its workers. And he added that “many of those who voted in favor conditioned their support on a review process, which, as president, he will use.” It is very likely that, if she reaches the White House, the Democrat will exert greater pressure regarding labor and environmental standards in Mexico. For his part, former President Donald Trump advocates the relocation of companies to the United States, and threatens to impose tariffs on Mexican products and American companies that move south of the Rio Grande, such as the agricultural machinery giant John Deere, which has threatened to impose 200% tariffs if it decides to move part of its production to Mexico.
There are storms on the horizon, but a future that can be positive
Amid the current tensions, the nearshoringwhich Sheinbaum and his advisors have championed as a key strategy for Mexico’s economic growth, could quickly become reshoringthat is, the relocation of supply chains to US territory. It is true that such a change could result in higher operating costs, reducing the competitiveness of American products in global markets and potentially increasing inflation in that country. Therefore, there will undoubtedly be an internal debate between the future US administration and the productive sector of its country. Washington will want to prioritize local investment, while companies will want to invest in Mexico to be competitive. Although governments do not directly control corporate investment, they can erect trade barriers and/or create tax incentives for companies to stay in the United States.
For Mexico, this should be a warning sign about the importance of the security and predictability that investors seek.
Stabilizing and strengthening the bilateral relationship is essential for Mexico’s interests and key to Sheinbaum’s political success. While 44% of foreign direct investment in Mexico comes from the United States, 36% of this investment goes to manufacturing, the most important sector of the Mexican economy. Additionally, millions of jobs on both sides of the border depend, directly or indirectly, on bilateral trade.
While trade between the two countries is at an all-time high, the current political landscape is putting severe pressure on bilateral ties. Beyond the rhetoric, the reality is that the United States, as Mexico’s largest trading partner, cannot afford to cut economic ties without risking significant disruption. The deeply integrated supply chains that define trade in North America are essential to the region’s economic well-being. This interdependence is particularly crucial for the United States, as its growing rivalry with China makes the stability of the relationship with Mexico vitally important.
Despite the current storms, the future of relations between Mexico and the United States remains promising. Both economies are deeply intertwined: Mexico became its neighbor’s main trading partner in 2023. The mutual benefits of this integration cannot be underestimated: approximately 80% of Mexico’s exports to the US are intermediate goods crucial for the global competitiveness of the American manufacturing, and a significant proportion of these are produced by American companies operating in our country.
The ongoing Otay Mesa II port of entry project on the US-Mexico border, which will expedite crossings for commercial and private vehicles, is an extremely positive development for the region. Also relevant are recent investments by companies such as AWS in Querétaro, which show confidence in Mexico’s role as a continental technology and nearshoring center. The $5 billion data cluster project, set to begin operations in 2025, exemplifies how Mexico can leverage its geographic advantage and trade agreements to attract significant foreign investment.
Sheinbaum’s strategic decisions
Sheinbaum must significantly strengthen Mexico-US relations to protect and promote the strategic interests of our country. Although the president has consistently stressed the importance of foreign direct investment and appointed experienced people to her cabinet, this alone will not be enough to reassure our trading partners.
Mexico’s first female president will need to distinguish her administration from that of her predecessor, and the secondary laws of judicial reform could play a crucial role in this differentiation. However, it will also need to make additional efforts to address investor concerns, send clear signals of stability, and more closely align its policy with Mexico’s international trade obligations. Prioritizing diplomatic channels, based on respect and mutual trust, will be essential to send the right message.
Mexico is exceptionally positioned to capitalize on the geopolitical turbulence the world is currently experiencing. Aside from Canada, no other country can access the US market without crossing an ocean or passing through Mexican or Canadian territory. However, what until a few weeks ago seemed like a promising start for Sheinbaum’s administration has been undermined by López Obrador’s end-of-term revanchist maneuvers.
In a world where global alliances are shifting and the pressures of national politics threaten to destabilize long-standing ties, Sheinbaum’s challenge is clear: lead Mexico down a path of stability and growth, ensuring that clouds of uncertainty do not obscure the shared benefits of cooperation. Sheinbaum has the potential to redefine Mexico’s role on the global stage, fostering a future in which Mexican interests prevail over the political game, and in which the relationship with the United States continues to thrive in times of change. ~
She is a professor at the Pan American Institute of Senior Business Management (IPADE) and a columnist for the newspaper Reform.