USMCA review opens as Mexico ties fray, threatening North American energy trade

USMCA review opens as Mexico ties fray, threatening North American energy trade Trade pact extension looks unlikely as bilateral relations deteriorate ahead of 2026 review, analysts say. KKR's $4.2 billion deal to buy EDF's North American clean energy operations, announced on Thursday (2026-07-09), underscores how much cross-border investment depends on a stable North American trade framework as the US-Mexico-Canada Agreement faces its first review.⁷ The private equity firm is acquiring a portfolio of solar, wind and battery storage assets across the U.S. and Canada, plus 17 GW of service contracts that include a small amount in Mexico.⁷ The USMCA review is now formally underway, and the bilateral relationship between Washington and Mexico City is in its worst shape in years.³ Analysts say it is unlikely all three countries will agree to extend the deal, according to a Foreign Policy report from late May (2026-05-29).³ Mexico's manufacturing boom has been built on tariff-free access to the U.S. market, giving any breakdown of the pact direct consequences for industrial activity and energy demand across the border.³ North American supply chains are shifting at the same time. The chief executive of a major American manufacturer that now produces 90% of its products in China says the company plans to dramatically boost investment in American and European manufacturing over the next five years.² That shift, driven by the same geopolitical pressures straining the USMCA, could accelerate the rerouting of energy-intensive industrial activity away from Mexico.² Mexico's government continues to face allegations that it is protecting links between politicians and transnational criminal organizations, further poisoning the atmosphere ahead of trade talks.³ The White House has tried to repair relationships with allies damaged by the previous administration, but the bilateral relationship with Mexico has only worsened.^1,3 The World Cup is underway across the three countries, co-hosted by the United States, Mexico and Canada, with 78 matches taking place across 11 U.S. cities.^4,6 The tournament might seem an opportunity for soft-power cooperation. But timing is awkward. As the U.S. closes itself off from the world, Mexico is doing the opposite, opening its economy wider.⁵ For energy markets, a potential USMCA collapse would create direct risks. Cross-border electricity trade, natural gas flows and renewable energy investment all depend on the pact's rules of origin and investment protections. KKR's $4.2 billion bet on North American clean energy, with up to $390 million in additional contingent payments, assumes a stable trade framework remains in place.⁷ Canada is pursuing its own defence industrial strategy built around a "build-partner-buy" framework, signaling a desire for deeper integration with the U.S. military-industrial base.⁸ But the wider trade relationship shows signs of strain. Both Canada and Mexico have reason to doubt Washington's commitment to rules-based commerce.^8,3 ICE Brent crude front-month traded at $84.50/bbl as of Thursday (2026-07-16), down 0.14%, while NYMEX WTI front-month sat at $79.39/bbl, off 0.20%. Neither price yet reflects a possible breakdown of North American trade arrangements. A failure to extend the pact would hit Mexican manufacturing hard, potentially reducing industrial energy demand and reshaping gas and power flows across the border. Analysts say extension is unlikely.³ If they are right, the investment assumptions embedded in deals like KKR's — built on tariff-free access and cross-border project finance — will require revision.⁷