Fitch Sees USMCA Still in Place, but with Weakened “Operational Life”: The Risk to Investment and Nearshoring in Mexico
The USMCA could make it through its scheduled review, but not necessarily as an anchor of certainty for companies and investors. Fitch Ratings warned that the trade deal could slip into a “zombie” phase: it exists on paper, but loses its ability to shape expectations and rein in discretionary decisions—particularly if the United States retains room to impose tariffs or other trade measures selectively. In that environment, the agreement would remain in force, but recurring caveats would increase regulatory volatility and raise the cost of planning long-term investments.
The rating agency points to a meaningful shift in the risk balance: today, a full breakdown of the agreement is less concerning than the possibility of an extended period of coexistence with less-clear rules or frequent windows for political renegotiation. For Mexico, the impact would be significant. The nearshoring narrative—relocating supply chains to North America—depends not only on costs and logistics but also on institutional and trade certainty; if the framework is seen as fragile, Mexico’s comparative advantage versus other destinations shrinks, even if Mexican exports remain strong thanks to deep production integration with the U.S. economy.
The backdrop includes a trade relationship increasingly shaped by issues that aren’t strictly tariff-related: rules of origin, sector disputes, industrial policy, and labor and environmental standards. Under a “zombie USMCA,” companies would likely build risk premiums into their projects: more caution when siting new plants, phased expansion decisions, and a stronger emphasis on supplier flexibility. For sectors such as autos, electrical/electronics equipment, and medical devices—those most tied to regional trade—clarity on compliance and rule stability can be just as decisive as the exchange rate or energy costs.
Fitch also underscored that domestic conditions limit Mexico’s room to fully capitalize on nearshoring. Market participants often read debates over judicial, labor, and economic reforms as factors that could raise transaction costs and lengthen dispute resolution. Added to that are well-known structural challenges: energy and water availability in industrial hubs, logistics infrastructure bottlenecks, and security gaps that increase operating costs. Taken together, these elements affect investment timing: they don’t necessarily cancel projects, but they can delay them or scale them down.
On the macro front, Fitch expects Mexico to remain below its potential growth rate, in line with a region advancing at a moderate pace. The diagnosis combines weak investment with stagnant productivity, which caps trend growth. While Mexico’s economy has shown resilience through manufactured exports and remittances, momentum depends on a rebound in gross fixed investment and on consumption not being squeezed by still-restrictive real rates or by less dynamic formal job creation.
Fiscal policy is another piece of the puzzle. Fitch acknowledges regional progress on post-pandemic consolidation, but in Mexico it sees a still-elevated deficit and a rising public-debt trajectory. A persistent focal point is financial support for Pemex, which has weighed on public finances and remains a key variable for the sovereign credit profile. In addition, the analysis suggests consolidation has relied more on containing capital spending than on structurally strengthening revenues—a mix that may ease the short term but can hurt future growth capacity if it persists.
By 2026, a “zombie mode” for the deal would have practical implications: a wider range of scenarios for trade, greater sensitivity in FX markets to political headlines, and an environment where companies prioritize contracts, hedging, and strict compliance to mitigate risk. In that context, Mexico could sustain its role as North America’s manufacturing platform, but with a bumpier path to attracting high value-added projects—especially if regulatory uncertainty competes with industrial-policy incentives in other jurisdictions.
In perspective, Fitch’s warning is not a breakup forecast, but a caution about the quality of how the trade framework functions and how it interacts with domestic factors. If the USMCA is renewed without restoring certainty, and if fiscal consolidation leans too heavily on cutting public investment, Mexico risks growing slowly and missing part of the relocation cycle. If, instead, uncertainty is reduced and bottlenecks are addressed, the agreement can remain a pillar for investment, exports, and macro stability.
