These Are The Main Industries Boosting US-MX Trade
The U.S. and Mexico share a long history of trade and friendship, but in recent years, the amount of goods moving between the two countries has taken off. Trade between Mexico and the U.S. totaled $779.3 billion in 2022, making it one of the world's largest trade relationships.
Though there are many industries that move cargo between these countries, some have become especially important in helping facilitate nearshoring operations for U.S. businesses looking to expand their supply chains beyond domestic borders. Automotive components and electronics represent some of the largest goods moving back and forth across the border; other key sectors include medical supplies, agricultural goods, and machinery. In recent years, the rise of e-commerce has also increased the need for cross-border trade between Mexico and the United States, with many U.S. companies taking advantage of low labor costs in Mexico in order to better compete with larger global retailers.
In this article, we will highlight some of the top industries that move cargo between the U.S. and Mexico, discussing why they account for such a large portion of overall trade, as well as outlining how each industry impacts both economies.
U.S.-Mexico Trade at a Glance
Mexico is the largest Spanish-speaking country in the world. Its USD 1.29 trillion economy is the second-largest in Latin America, and the country maintains deep trade and investment ties with the United States. The U.S. is Mexico’s largest export market, accounting for a whopping 55% of its total exports, and it has grown over the years. In 2017, it totaled approximately $614 billion worth of goods traded between the two countries, whereas in 2022 it registered a total of $779.3 billion. Top U.S. goods exports include electronics, vehicles, fuels, minerals, plastics, and machinery. On the other hand, Mexico was the second-largest destination for U.S. agricultural exports in 2021, importing USD 18.3 billion in U.S. agricultural products, including corn, soybeans, dairy, pork, and poultry meat. This provides great growth opportunities for companies on both sides of the border.
Automotive Industry in U.S.-Mexico Freight
Mexico is a major market for a wide spectrum of U.S. automotive products, ranging from passenger vehicles and light trucks to buses, auto parts, and supplies. This sector holds considerable economic weight, contributing 3.5 percent to Mexico's GDP. Currently, Mexico ranks as the seventh-largest global passenger vehicle manufacturer, with an annual production output of approximately three million vehicles. An impressive 90 percent of these vehicles are earmarked for export, and 76 percent find their way to the United States. Renowned automakers have established themselves in Mexico, including Audi, Baic Group, BMW, Stellantis (comprising FCA and PSA Group), Ford, General Motors, Honda, Hyundai, Jac by Giant Motors, Kia, Mazda, Mercedes-Benz, Nissan, Toyota, and Volkswagen.
The automotive industry is one of the most significant contributors to the U.S.-Mexico trade relationship, with $120 billion worth of vehicles, parts, and components exchanged between the two nations in 2017 alone. Mexican exports to the United States encompass an array of products, including light trucks, passenger vehicles, and auto parts. Conversely, the United States exports primarily comprise components integral to vehicle production, such as engines, transmissions, and electronics. Beyond the economic implications, this sector has far-reaching effects, optimizing transportation efficiency for automakers on both sides of the border and generating employment opportunities spanning various industries. Moreover, the cross-border automotive trade has been further facilitated by initiatives like the US-Mexico-Canada Agreement (USMCA), which provide clear rules of origin and preferential duties for specific products, enhancing the fluidity and stability of trade relations in this vital sector.
Agricultural Goods in U.S.-Mexico Freight
The agricultural sector plays a crucial role in the dynamic U.S.-Mexico trade relationship, with a significant exchange of over $28 billion worth of agricultural products occurring in 2022. Mexican exports to the United States primarily encompass a diverse range of items, including vegetables, fruits, beverages, distilled spirits, and other perishable goods. In contrast, U.S. exports to Mexico are characterized by grains and oil seeds as the dominant categories. This mutually beneficial trade is one of great importance to both nations.
For Mexico, exporting agricultural products to the United States provides local farmers with access to advanced technology and essential resources that might otherwise be out of reach. This access fosters increased productivity and competitiveness within Mexico's agricultural sector. Meanwhile, the United States benefits from Mexico's substantial population and surging demand for agricultural goods, positioning U.S. producers to tap into this expanding market.
Beyond economic advantages, the cross-border collaboration in agriculture strengthens the ties between the two nations. It enables Mexican farmers to explore new markets for their products, contributing to the diversification of their customer base. Additionally, this cooperative effort ensures a steady and reliable food supply for both countries, bolstering food security and stability.
Electronic Components in U.S.-Mexico Freight
The electronics industry in Mexico has solidified its position as a key player on the global stage, with deep-rooted ties to the United States. This industry has thrived, dating back to its early involvement in the Maquiladora Program, making it one of Mexico's primary manufacturing sectors. In 2022, the United States remained the top destination for Mexico's Electrical and Electronic Equipment exports, amounting to a substantial $84.8 billion.
The success of Mexico's export-oriented assembly plants, many of which are affiliated with U.S. parent companies, is closely intertwined with the bilateral trade between the U.S. and Mexico. These plants, which originated under the Maquiladora program in the 1960s, have become significant contributors to Mexico's trade with the United States. They rely heavily on imported components to produce finished goods, a substantial portion of which are destined for the U.S. market, making Mexico the second-largest supplier of electronic products to the U.S.
Mexico has attracted some of the world's top transnational electronics manufacturing services (EMS) companies, with nine of the top ten firms establishing a foothold in the country. Recognizable names such as Samsung, LG, Toshiba, Foxconn, Flextronics, and Intel have found a thriving environment in Mexico's electronics industry. Official figures reveal that Mexico boasts a diverse landscape of over 1,100 companies engaged in designing and manufacturing electronic devices and components, which account for 5.3% of Mexico's manufacturing GDP.
Benefits of U.S.-Mexico Trade
The U.S.-Mexico trade relationship is one of the most important ones in the global economy, offering a multitude of economic and social advantages to both nations. Through increased trade, both countries have access to a wider range of products that would otherwise be unavailable or unaffordable. In addition, this dynamic encourages mutual economic development by creating employment and investment opportunities on both sides of the border.
Key developments like the new USMCA agreement and the Maquiladora Program have brought tremendous benefits to trade relationships, through tax incentives, training programs, more favorable conditions to doing business, etc., all of which greatly contribute to Mexico’s rise as a key manufacturing destination and a “winner” from the nearshoring trend.
If you are considering seizing the wave of nearshoring opportunities, contact our experts at Nuvocargo to find out how to accelerate your supply chain.