As Trump sows tensions with Mexico, Beijing may reap rewards

2/2/2017 CNBC

mexico-chinaAs President Donald Trump wages a public and bellicose battle with the Mexican government, China may emerge as the victor.

The world’s number-two economy is closely watching as Trump threatens to renegotiate the North American Free Trade Agreement and presses Mexican President Enrique Peña Nieto to finance construction of a border wall. The Mexican economy, already facing a slowdown, could deteriorate further under both scenarios. Either way, strategists widely agree Mexico will look to reduce dependence on its largest trading partner, and Beijing is likely to emerge as a contender to replace the void left by Washington.

“Like other countries worried about the uncertainties of a Trump administration, Mexico will look to deepen engagement with China,” said Shawlin Chaw, senior analyst at Control Risks. “The mainland is a natural choice due to its economic power and in return, Beijing will able to increase the international market for Chinese exports and diversify its sources of raw materials.”

 Mexico has one of the highest number of bilateral trade agreements in the world and China was its third-largest trading partner in 2015—with exports to the mainland tallying $4.9 billion, according to the World Bank. The two pledged to strengthen ties at a meeting in December, with business deals already underway. In fact, Anhui Jianghuai Automobile and Giant Motors, partially owned by Mexican billionaire Carlos Slim, announced Wednesday they would pump more than $212.46 million into SUV production in Hidalgo.

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