Mexico has won a temporary reprieve in its trade dispute with Washington, but the suspension of heavy tariffs for 30 days papers over persistent structural weaknesses in the relationship between North America's largest economies.
President Claudia Sheinbaum's diplomatic victory – while welcome news for Mexican markets – leaves unresolved the fundamental question of Mexico's economic dependence on its northern neighbour. Her cool-headed approach marks a departure from her predecessor's combative stance, yet may prove insufficient to address the underlying trade imbalances. 

Sheinbaum’s frantic negotiations with US President Donald Trump have led to an agreement that temporarily sidesteps a disastrous 25% tariff on Mexican exports. Still, the price of avoiding these penalties seems high, with the deal including the deployment of 10,000 additional National Guard troops to the northern border. These troops are tasked with fighting the trafficking of fentanyl and other illegal substances into the US – yet the question remains whether this will truly stem the flow of drugs or simply serve as a symbolic gesture to placate Trump's fury in the short term.

In theory, the suspension of tariffs offers a welcome respite for Mexico’s economy, sparing it from the immediate negative effects of a full-blown trade war with its largest partner. However, tariffs are a blunt instrument, and even a temporary halt to their implementation does not resolve the underlying trade tension. The threat still looms over Mexico, and Trump’s erratic approach to trade policies and fixation with trade deficits only increases uncertainty in bilateral relations. Should another wave of levies be slapped, Mexico could find itself vulnerable again, especially given the volatile nature of the "America First" agenda. On top of that, the deal's short duration suggests Washington remains prepared to leverage its economic might, despite Mexico's strategic importance as a near-shoring destination for US manufacturers seeking alternatives to China.

Trump, for his part, gets to present the agreement as a victory for his administration’s focus on border security, framing it as a win for his supporters. But the reality of the deal seems more like a forced compromise than a true solution to the drug trade crisis. And, truth be told, Mexico was already helping the US intercept migrants at the border after a deal secured last year by the Biden administration. Sheinbaum has had to make more concessions that may not lead to tangible results. While the additional troops may help reduce certain border-related problems, they will not address the systemic issues driving drug trafficking in the first place.

Despite the apparent diplomatic success, analysts warn that Mexico faces a more profound challenge in the long term. With trade relations increasingly shaped by Trump’s unpredictable moves, the country can no longer afford to rely solely on the US. It must seek diversification of its economic partnerships to safeguard against future political whims and shifting allegiances. The temporary lull should not distract from the need for Mexico to actively expand its international trade network beyond the US − a partner whose behaviour is only set to become more mercurial under Trump’s second term.

With over 80% of Mexican exports directed to the US, tariffs would have crippled key nearshoring sectors like automotive manufacturing, electronics, and energy, as well as agriculture, impacting everything from vehicles and semiconductors to avocados and tequila. The immediate fallout would likely include a recession, rising unemployment, inflation, and a weakened peso.

The suspension, resulting from Sheinbaum's successful engagement with Trump's hawkish White House, may also look like a short-term victory for the leftist leader, but it raises the question of how long such measures can endure. Will Mexico continue to bend to the will of its northern neighbour, or will it assert more independence in crafting its future economic strategy? Trump's tariff turnaround is a stern reminder that the country remains at the mercy of a larger, unpredictable power. Its future economic stability hinges on deftly navigating a diplomatic tightrope and working to open new, alternative, trade avenues.