Challenges in Mexico's Trade History: 30 Years on a Tightrope
The development of Mexico would not be where it is without the free trade agreements. Ties with North America have propelled the country's exports, from NAFTA to the current USMCA, creating decades of prosperity. In 1994, when NAFTA took effect, Mexican exports to the United States reached $51.619 billion. By 2024, under the USMCA framework, this number surged tenfold, reaching $512.569 billion, according to data from Banxico.
Trade with Canada has also seen considerable growth. Three decades ago, Mexico exported only $1.519 billion to that country; by 2024, that number skyrocketed to $18.906 billion, 12.4 times more. However, this positive outlook faces several threats. The recent implementation of a 25% tariff by Donald Trump, though currently suspended for the automotive sector, has raised concerns. Experts warn that free trade with North America is no longer a given, jeopardizing three decades of commercial interconnection. Mexico has been the primary beneficiary of this integration in North America. Unlike Canada, whose growth in exports to the United States has been more moderate, with a 3.2 times increase over the last 30 years, Canada’s exports to Mexico have grown eightfold during the same period. Meanwhile, U.S. exports to Canada have tripled, while exports to Mexico increased 6.5 times.
The interdependence between Mexico and the United States is increasingly evident. An analysis from the Atlantic Council points out that the trade relationship between the two countries is becoming more interconnected, as supply chains cross borders multiple times to optimize production. For every dollar in manufactured goods that Mexico sends to the United States, 30 cents come from inputs or materials made in the U.S. The AmCham supports this point by indicating that U.S. imports from Mexico contain more than double the American value added compared to imports from any other country, and nearly ten times more than those from China. Additionally, Mexico ranks as the top buyer of U.S. products made by small and medium-sized enterprises, purchasing 2.2 times more than China and surpassing the combined purchases from Japan, South Korea, India, Switzerland, the Netherlands, and Germany. These figures not only reflect trade relations but also the creation of jobs, factories, and wages in the U.S.
The Mexican Institute for Competitiveness warns that tariffs, particularly on intermediate goods, can increase production costs and affect the economic viability of various supply chains. This raises the final product prices, impacts consumers, and reduces the region's competitiveness against other economies. According to Juan Carlos Baker, former Undersecretary of Foreign Trade, Mexico needs to define its role within the regional integration context. The relationship with the United States transcends trade, encompassing migration, security, technology, and artificial intelligence—issues that are intrinsically connected and require a well-defined strategy.
In light of this situation, questions arise about whether Mexico should move toward a customs union with the United States or align its foreign policy with the interests of its northern partners. It’s also a timely moment to discuss an industrial policy strategy for the region. Making decisions on these matters is crucial. Mexico needs to determine its course rather than let circumstances dictate it. If geography, trade, and the economy have already brought us to this point, it’s time to develop a strategy that maximizes the available opportunities. Trade agreements have not only driven the growth of the Mexican economy but also transformed the everyday lives of its people. Before the advent of NAFTA and the USMCA, accessing U.S. or Canadian products wasn't as easy; today, the variety and availability are extensive. Mónica Lugo, Director of Institutional Relations at Prodensa and a former negotiator for the USMCA, notes that from the moment someone starts their day, their routine is already influenced by this economic integration. From a coffee at Starbucks, an Uber ride, to using WhatsApp or browsing Facebook; for breakfast, there might be pancakes with Canadian maple syrup. Later, their sandwich could feature ham and bread from the U.S. Mexico imports not only food but also wood, steel, and energy from Canada and the United States. Without a trade agreement, access to these goods and services would be quite limited. For current generations, this integration feels normal, though just a few decades ago, the situation was very different. In the 1980s, getting American candy was almost a mission impossible. A Milky Way bar was considered a luxury, but today, it’s as simple as walking into any store to find one. This change, although perhaps not noticeable to many, illustrates how trade agreements have altered access to products and services in Mexico. What was once a privilege is now part of daily life.
This analysis highlights the importance of trade agreements in the growth of the Mexican economy. In such an interconnected world, it is crucial for Mexico to seek diversification in its trade relations and not overly depend on a single partner. Fluctuations in trade policies can pose risks, so a robust economic strategy should not only focus on trade but also on innovation and sustainable development to face any uncertainties in the future.
