AMLO’s Constitutional Reforms Will Damage the USMCA
As President Andrés Manuel López Obrador (AMLO) nears the end of his term, his recent actions have sparked a crisis in U.S.-Mexico relations that threatens to undermine the USMCA and years of economic integration. AMLO's decision to "pause" relations with the U.S. and Canadian embassies was a rhetorical retaliation against those countries for expressing concerns over the judicial reforms and all the package of constitutional amendments.
More importantly, the “pause” was also a move without legal ground in international law that marks a dangerous escalation in diplomatic tensions. This bold action signals a troubling shift away from AMLO’s earlier moderate stance towards his North American partners. Adding to the concern, President-elect Claudia Sheinbaum has publicly supported AMLO’s remarks, showing no signs of restraint.
The timing couldn't be worse. With the U.S. entering a heated election season, AMLO's provocations provide fodder for politicians eager to take a hard line on Mexico. This adversarial climate sets the stage for a potential cycle of retaliation, threatening to unravel years of carefully cultivated economic ties.
Of particular concern is the looming 2026 review of the USMCA. AMLO's constitutional reforms directly contravene key provisions of the agreement. For instance, the judicial reform undermines the requirement for independent judges in labor disputes, and the administrative reform threatens the autonomy of regulatory bodies in crucial sectors like telecommunications. There is no doubt that these, along with several other topics, will become contentious issues in 2026.
More broadly, the reforms are creating uncertainty and distrust among U.S. and Canadian investors and companies. The economic implications are already evident. Although Foreign Direct Investment in Mexico has reached historical highs in absolute terms, most of this capital consists of profit reinvestments, with new investments making up only 3% of the total. This unusually low number signals investor unease with Mexico’s increasingly unpredictable political and legal landscape.
Furthermore, AMLO's reforms threaten to derail the promising trend of nearshoring that many U.S. companies have been exploring. The American Sociedad ety of Mexico's warning that the judicial reforms "fail to provide legal certainty for investment" should serve as a wake-up call to businesses considering Mexico as an alternative to Asian supply chains.
The Sheinbaum administration will need to navigate the complex landscape of U.S.-Mexico relations. The likelihood of President-elect Sheinbaum replicating AMLO's model of bilateral relations—restraint in discourse and migration containment in exchange for reduced U.S. interference in internal affairs—seems slim. The shared structural challenges for Mexico and the U.S. are growing in complexity and urgency.
Issues like border security, migration, fentanyl trafficking, trade, and the rise of China as a competing superpower have gained political importance in Washington, D. C. The next U.S. administration—independently of who wins the November election—will demand Mexico’s cooperation in those areas, which will require stable diplomatic and institutional relations.
President-elect Sheinbaum has consistently stated that the relocation of industry to Mexico, often referred to as nearshoring, will be a cornerstone of her economic strategy. However, the reforms proposed by AMLO and supported by Sheinbaum present a significant challenge to this goal. These changes, which undermine judicial independence and regulatory autonomy, create an environment of legal uncertainty that is antithetical to the stable, predictable business climate required for successful nearshoring.
The future of North American economic integration hangs in the balance. The constitutional reforms pose a serious threat to the stability of the USMCA and the possibility of exploiting the full potential of nearshoring. The transition to a new administration in Mexico brings the opportunity to recover restraint and strategic decision-making. President-elect Sheinbaum is still on time to make the adjustments necessary to keep North American economic integration as one of the pillars of Mexico’s development.
