Depressed Energy Prices Cause Decline in U.S.-Mexico Trade


By Christopher Wilson, Deputy Director, Mexico Institute

forbesFrom 2009-2014, U.S.-Mexico trade skyrocketed. Bilateral trade grew 75%, faster than U.S. trade with any other major trading partner, including China (61%), and importantly, both imports and exports were growing rapidly. In 2015, trade growth came to a screeching halt, though strong fundamentals suggest this may be more of a temporary blip than a new trajectory.

The Census Bureau recently released U.S. merchandise trade statistics for 2015, and though Mexico is still the United States’ second largest export market and third largest overall trading partner, for the first time since the economic crisis of 2008-2009, U.S.-Mexico trade declined from the previous year’s level. Interestingly, as shown in the graph below, U.S.-Canada trade dropped sharply in 2015, allowing China to become the United States’ top trading partner. In 2014, the two countries traded $534.3 billion, but in 2015 that number fell to $531.1, a decline of some $3.2 billion dollars. U.S. imports from Mexico basically held steady, growing from $294.1 to $294.7 billion, although this apparent stagnation masks multiple underlying trends. Exports, on the other hand, dropped some $3.8 billion. This brief analysis examines recent trends in bilateral trade and their implications for the future of U.S. and Mexican economies.

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U.S. Natural Gas Exports to Mexico Taking Off

08/03/15 Forbes

Export Or Import DirectionsJust as Space X rockets may be taking off from the beaches at Boca Chica near Brownsville, natural gas exports to Mexico look to also sky rocket in the coming years. Due to changes in Mexican law in 2013 opening the electricity market to private investment, billions of dollars in contracts have been let to build power plants, electrical distribution facilities and natural gas pipelines. In turn U.S. pipeline companies and gas producers have moved to capture the lion’s share of that market. Given the fact that Texas and Gulf Coast producers have been rapidly losing their old Northeast and Midwest markets to Marcellus producers this has proven to be a timely and vital new market. The Energy Information Agency (EIA) estimates that natural gas exports to Mexico were 3% of production in April 2015 and are expected to grow to 5% by 2030.

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Mexico October factory exports soar by most in five-years

11/26/14 Reuters 

Reuters/Tomas Bravo
Reuters/Tomas Bravo

Mexican factory exports expanded by the most in over five years last month while consumer imports also rose, in a sign that a recovery in Latin America’s No. 2 economy may be gaining steam. Factory exports jumped 5.38 percent in October from September in seasonally adjusted terms off a contraction the prior month, the national statistics agency said on Wednesday, marking its biggest jump since August 2009. The rise was fueled by a 8.5 percent increase in auto exports, its best showing since February, and a 3.93 increase in non-auto factory exports. Most of Mexico’s exports are manufactured goods and nearly 80 percent of its exports are sent to the United States.

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Mexico Aims for Agreement on Sugar Exports to U.S.

10/01/14 Wall Street Journal 

sugarMexican Economy Minister Ildefonso Guajardo said Wednesday that Mexico is seeking a negotiated settlement to a dispute over Mexican sugar exports to the U.S., but that failure to reach an accord could lead Mexico to take the case to the World Trade Organization. The U.S. government in August imposed preliminary tariffs on Mexican sugar imports following complaints by U.S. sugar growers that the Mexican government subsidizes the domestic industry, allowing Mexico to flood the U.S. market with cheap sugar, harming U.S. producers.

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Mexico’s GDP Rises More Than Forecast as Export Demand Picks Up

08/21/14 Bloomberg

Mexican Flag XXLMexico’s economy grew more than forecast in the second quarter as a rebound in the U.S. boosted demand for the nation’s exports.

Gross domestic product climbed 1 percent from the previous quarter, when it expanded a revised 0.4 percent, the national statistics institute said today. The median estimate of 14 economists surveyed by Bloomberg was for growth of 0.8 percent. From a year earlier, GDP grew 1.6 percent, compared with a 1.9 percent in the first quarter, as Easter fell in April this year and March in 2013. First-quarter growth was revised up.

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Mexico manufacturing surge hides low-wage drag on economy

Export Or Import DirectionsReuters, 06/03/14

Abundant cheap labor has helped Mexico lure billions of dollars in foreign investment in recent years and spur a manufacturing sector so dynamic it has been likened to China.

But the same low wages that help make manufacturers competitive are a long-term drag on the economy. Millions of people working off the books for paltry sums holds back private consumption, crucial for sustained growth.

The government has slashed its growth forecast for 2014 after the economy expanded by just 0.3 percent in the first quarter, well short of expectations.

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Mexico becoming Nissan’s export hub for Americas: CEO

Reuters, 11/12/2013

autosNissan Motor Co Ltd  will build 1 million cars in Mexico by 2016, cementing the country’s position as the export hub for the Japanese automaker in the Americas, Chief Executive Carlos Ghosn told Reuters as he inaugurated a $2 billion plant.

Most of the cars from the new plant in Aguascalientes in central Mexico will be sent by rail to destinations throughout North and South America. A staff of 3,000 in the light, airy plant filled with rows of shiny yellow robots will produce one car every 38 seconds, in partnership with Nissan’s other Aguascalientes plant.

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