These Are The Main Industries Boosting US-MX Trade
Main takeaways
- The automotive industry represents the largest percentage of products traded between the U.S. and Mexico.
- Nearshoring has benefited the relationship between the U.S. and Mexico.
- Consumer goods manufactured in Mexico are replacing those manufactured in China.
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 them one of the world's largest trading partners.
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, computers/electronics, 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. 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 a great opportunity for growth for companies on both sides of the border.
Automotive Industry in U.S.-Mexico Trade
Mexico is a major market for U.S. passenger vehicles, light vehicles, trucks, buses, auto parts, and supplies, comprising 3.5 percent of the nation’s GDP. Nowadays, Mexico is the seventh-largest global passenger vehicle manufacturer, producing approximately three million vehicles annually. Ninety percent of vehicles produced in Mexico are exported, with 76 percent destined for the United States. Established automakers in Mexico include Audi, Baic Group, BMW, Stellantis (made up of 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 dynamic, with over $120 billion worth of vehicles, parts, and components shipped between the two countries in 2017. Automotive exports from Mexico to the U.S. include light trucks, passenger vehicles, and auto parts. On the other hand, U.S. exports to Mexico consist mainly of components used in vehicle products such as engines, transmissions, and electronics. In addition to reducing transportation costs and time for automakers on both sides of the border, this sector also provides employment for thousands of people across multiple industries. Furthermore, cross-border trade between Mexico and the U.S. has been facilitated by programs such as USMCA, which provide rules of origin and preferential duties for certain products.
Agricultural Goods in U.S.-Mexico Trade
Agricultural goods are also an important component of the U.S.-Mexico trade relationship, with over $28 billion worth of agricultural products being exchanged between the two countries in 2022. Mexican exports to the U.S. consist mainly of vegetables, fruit, beverages, distilled spirits, and other perishables, while U.S. exports to Mexico are dominated by grains and oil seeds. This trade is essential for both countries, as it provides Mexican farmers with access to technology and resources that would otherwise be unavailable, and allows U.S. producers to capitalize on Mexico’s large population and rapidly growing demand for agricultural products. Furthermore, cross-border cooperation between the two countries enables Mexican farmers to access new markets for their products and helps ensure a reliable supply of food for both countries. At the same time, it also encourages mutual economic development by providing employment and investment opportunities in Mexico’s agricultural sector.
Consumer Goods in U.S.-Mexico Trade
Consumer goods are also a major component of U.S.-Mexico trade, with over $47 billion worth of consumer products being exchanged between the two countries in 2017.
Nearshoring has increased over the past decade, mostly due to ongoing tension between the U.S. and China, significant increases in shipping costs from China, the effects of the pandemic on global supply chains, and sustainability concerns. According to a Thomas Survey in April 2020, 64% of North American manufacturers interviewed said they were likely to bring manufacturing production back to the Americas. Proof of this effect is that imports from Mexico climbed by 17.5% in October 2022 compared to the previous year, while imports from China declined by 7.2%. This trend is even more pronounced in vehicles and electronics, which grew by 25.8% and 24.3%, respectively.
Another major consequence of the trade war is a fall in computer imports from China, a product with a zero-tariff status in the United States that has decreased by $3.4 billion, whereas imports from Mexico have climbed by $9.2 billion. One example of this is Dell, the giant computer manufacturer, who in 2019 announced the opening of a new manufacturing facility in Mexico to reduce the impact of tariffs on its supply chains in the U.S.
China now accounts for 18% of US imports, down from 22% at the start of the trade conflict. In contrast, imports from Mexico grew by 38% from pre-trade war levels and have recovered substantially since the outbreak.
Benefits of U.S.-Mexico Trade
The U.S.-Mexico trade relationship is an important one, providing both countries with numerous economic and social benefits. 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 in the automotive, agricultural, and consumer sectors on both sides of the border.
Among the main trade favorable conditions between the U.S. and Mexico under the USMCA are the following: Fewer obstacles to doing business, Reduced cost of moving goods internationally, Support for e-commerce, Resources aimed at small businesses, and more.
If you are considering riding the wave of nearshoring opportunities, contact our experts at Nuvocargo to find out how to accelerate your supply chain.
