Economics: New points of friction in US-Mexico trade, a potential threat to FDI and nearshoring
Mexican exports to the US have been experiencing a slowdown in recent months that has been most concentrated in their non-automotive manufacturing component even as automotive exports have been highly volatile, delivering very high growth rates in some months of 2022 and early 2023 after dropping significantly in the same months of 2021 in response to the shortfalls in inputs essential to the production of vehicles and other automotive products. Non-automotive exports, which account for between 60% and 70% of the manufactured goods Mexico ships abroad, have registered a clear deceleration trend in recent months that has come in response to both the slowdown in US industrial production and exchange rate appreciation.
In recent years, Mexico has expanded its share of the US import market, overtaking China in the process. In order to be sustainable, the Mexican economy’s increased integration within the USMCA needs to be the result of more investments aimed at extensively linking value chains. But judging by the third trilateral follow-up meeting of the USMCA, held this month in Cancun to scant media attention and the first such event that failed to produce a joint communiqué since Nafta first took effect in the mid 90s, increasing tensions with Washington over a range of trade issues could complicate those relations and Mexico’s prospects for greater export growth. Those tensions are likely to continue to build not only in response to some moves by the López Obrador government but also as political pressures mount over compliance with treaty provisions as we get closer to the US presidential elections.
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