This article is written by Porfirio Waters
The U.S. and Mexico have a strong economic partnership. This includes trade, foreign investment, and money sent home by migrants. In 2022, the two countries traded $855.1 billion in goods and services. The U.S. sold $362.0 billion to Mexico. It bought $493.1 billion from Mexico. Mexico is a leading trading partner. It accounts for 72% of its total exports and 38% of its imports. Trade between the countries is growing. U.S. imports from Mexico went up by 18.9% from 2021 to 2022.
The USMCA trade agreement helps this relationship. It improves cooperation between the three countries. The U.S. is a major source of foreign investment for Mexico. This money goes into manufacturing, services, and energy. It helps Mexico’s economy, creates jobs, and improves technology. Migration is also a big part of the relationship. Many Mexicans move to the U.S. for better opportunities. In the second quarter of 2024, Mexicans in the U.S. sent home about $16.639 billion.
From April to June 2024, Mexico saw a large outflow of investment money. The Bank of Mexico reported a withdrawal of $8.233 billion. This was the most since the end of 2021. The exchange rate also went above 20 pesos per dollar for the first time since 2022. Global economic activity grew at a slower rate during this time.
Trade Contributors
Here are some of the main goods traded between the U.S. and Mexico.
U.S. Exports to Mexico
- Machinery and mechanical appliances: 29.9% of U.S. exports to Mexico in 2021
- Oils, minerals, lime, and cement: 16.0% of U.S. exports
- Chemicals, plastics, rubber, and leather goods: 15.9% of U.S. exports
- Refined petroleum: $39.4 billion in 2022
- Motor vehicles and parts: $16.5 billion in 2022
- Petroleum gas: $15.6 billion in 2022
U.S. Imports from Mexico
- Metallic products, machinery, and equipment: 59% of Mexico’s exports to the U.S.
- Oil products: 12% of Mexico’s exports
- Agricultural goods: 3% of Mexico’s exports
Political Changes and Risks
Claudia Sheinbaum of the Morena Party won the election. Her mentor, President Andrés Manuel López Obrador (AMLO), and his allies will likely get a two-thirds majority in Congress. This would give them the power to change Mexico’s constitution by themselves.
AMLO leaves office on October 1. Before that, his party plans to make 18 constitutional reforms. These changes could weaken Mexico’s economy and its investment environment. They could remove checks and balances. The changes might also hurt Mexico’s ability to follow international agreements like the USMCA. If approved, these reforms could challenge North America’s ability to compete in the long run. They could also threaten nearshoring. Billions of dollars in U.S. and Canadian investments could be at risk. The reforms could also make the 2026 review of the USMCA more difficult.
Unconstitutional?
Mexico’s Supreme Court has said some of AMLO’s actions are unconstitutional. For example, he tried to limit private investment in energy. He also tried to put civilian security forces under military control. The judicial reform would replace all Supreme Court justices and federal judges. They would be chosen by popular vote, with no clear professional requirements. This would make the judiciary less independent. Judges could be influenced by politicians and donors.
AMLO’s reforms could hurt the USMCA and nearshoring. The reforms might weaken Mexico’s economy and its investment climate. This could affect regional trade. Billions of dollars in U.S. and Canadian investments in Mexico could be at risk. The 2026 review of the USMCA could also get complicated. Businesses might be less likely to move their operations to Mexico. This could challenge North America’s ability to compete. To deal with this, the U.S. and Canada can talk with Mexico. They can push for new laws that improve transparency and stability. They can also support private companies and make sure Mexico follows the USMCA which can make their supply chains more diverse to reduce risks.
TradeFlex
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