By Emily Green MEXICO CITY (Reuters) -Falling investment, slowing growth, and the changing whims of U.S. President Donald Trump have led Mexico to support an early review of the U.S.-Mexico-Canada (USMCA) trade agreement, a sharp U-turn on its previous plan to hold off for as long as possible. Three Mexican officials told Reuters the shift was due in part to the need to gain some longer-term certainty around the country's trade relationship with its largest export market. But they said it was also key that Trump appeared to want an earlier review, because the U.S. president holds better cards and trying to keep on his good side has been a core Mexican strategy that has shown positive results. Mexico's Economy Minister Marcelo Ebrard said this week he expects the review's "formal start" to begin as soon as September, despite being scheduled in the agreement for 2026. It is clear that Trump has more leverage, said Juan Carlos Baker, Mexico's former chief negotiator for USMCA. "If he believes Mexico is not playing ball, you might be risking he will one day show up and announce the U.S. is exiting the agreement altogether," he said. Mexico is looking for any clarity it can find. The uncertainty over trade rules has already impacted its economy. Foreign direct investment in the first quarter of the year fell 21% compared to the same period last year, according to figures from Mexico's Central Bank. Some of that may be related to business community jitters about Mexico's judicial reform. Still, uncertainty over tariffs has played a significant role. On Wednesday, the central bank cut its GDP forecast for this year to just 0.1%. The International Monetary Fund prediction is even worse at -0.3%. "Uncertainty kills investment," said Emilio Romano, president of Mexico's Bankers Association, noting that 40% of Mexico's GDP is U.S.-dependent. Mexico's reliance on the U.S. makes the USMCA negotiations almost existential to the country's economy and a huge priority for Sheinbaum. Over 80% of total Mexican goods exports go to the U.S. and free trade with its northern neighbor drove Mexico to overtake China as the U.S.'s top trading partner and turned it into one of the world's largest auto manufacturers. Mexican officials are worried enough about angering Trump that they have held off signing an updated trade agreement with the European Union for fear it could jeopardize trade talks with the U.S., according to one European official. UNRELIABLE NEGOTIATIONS Mexico had originally wanted to wait as long as possible before opening talks on USMCA, so it could first resolve bilateral issues like the tariffs imposed due to fentanyl trafficking and migration, and so U.S. consumers would begin to feel inflationary pressures from Trump's tariffs. That approach tallies with Canada's, with Prime Minister Mark Carney saying this week he wanted to make progress on bilateral issues with the U.S. before opening talks on USMCA. Amid the uncertainty, Ebrard and his deputy Luis Rosendo Gutierrez have for months been almost constantly shuttling between Mexico and Washington, to meet with U.S. Commerce Secretary Howard Lutnick, a billionaire investor, and Jamieson Greer, a former Air Force officer who is Trump's top trade official. "It's important to be in Washington just to take care of any issues that can come suddenly to the table. And it's important to be present," said a Mexican official familiar with the negotiations. "We are taking care of our place in relative terms with other countries." But negotiations with the Trump administration can be unreliable. In April, as the screwworm parasitic fly threatened to decimate Mexico's billion-dollar cattle market, officials reached an agreement that the U.S. would not close its border to livestock in exchange for Mexico doing more to fight the pest. Just 11 days later, the U.S. abruptly shut the border anyway, catching frustrated Mexican officials flat-footed. The question mark hovering over USMCA's future has overshadowed victories by Mexico's negotiating team, including convincing the Trump administration to suspend tariffs on USMCA-compliant auto parts. "We left intensive care. Now we are in intermediate care," said Francisco Gonzalez, executive director of Mexico's National Auto Parts Association. Until the USMCA review is complete, he said new investment is "pretty much suspended, basically on standby." (Reporting by Emily Green; additional reporting by Stephen Eisenhammer; Editing by David Gregorio)
