Former president Donald Trump has drawn intense criticism from many in the international community for his protectionist stance and strict adherence to an “America First” agenda when it comes to trade. Among other concerns for the Trump administration, one of the primary targets of the president’s ire has been the North American Free Trade Agreement (NAFTA). Reached in 1994, the agreement established a trilateral trade bloc between Canada, the U.S., and Mexico. While disagreements about the effectiveness of NAFTA have taken place over the past two decades, many economists believe that the agreement has generally been beneficial for each of the three countries and for their citizens overall. Indeed, a report by Bloomberg suggested that Trump’s attempts to do away with or renegotiate NAFTA could adversely impact the U.S. economy and potentially cost U.S. citizens jobs.
For better or for worse, then, news from the White House indicates that a renegotiation of the NAFTA arrangement may have reached a critical step. According to BBC News, Trump announced that the U.S. and Mexico had come to an agreement on terms for a revised deal, calling the updated terms “much more fair.” Canada will need to sign off on any adjustments to NAFTA, and the final outcome of the updates remains in doubt. Below, we’ll explore how trade between the U.S. and Mexico works.
Almost $616 Billion in 2017
According to the Office of the United States Trade Representative, U.S. goods and services trade with Mexico reached a total of nearly $616 billion in 2017. Of this, just over $276 billion were exports, while close to $340 billion were imports. Thus, the U.S. trade deficit with Mexico was about $63.6 billion for last year.
These numbers are not necessarily able to paint a complete picture of trade between these two countries, however. Indeed, international shipments of non-U.S. goods tends to contribute to confusion surrounding trade balances. U.S. data thus reports a $71 billion goods deficit with Mexico, while both Canada and Mexico reported significantly larger U.S. goods surpluses at the same time. In Mexico’s case, the surplus was $132.4 billion, according to Mexican reports.
Regardless, Mexico is one of the very largest trading partners with the U.S., accounting for $557.6 billion in total two way goods trade for 2017.
Mexico was the second-largest goods export market in 2017. With $243.3 billion in U.S. goods exported to Mexico in 2017, that marks an increase of 485% since 1993, the last year before NAFTA took effect. In the first half of 2018, the U.S. exported about $131.3 billion worth of goods to Mexico, suggesting that this year the U.S. is on pace to exceed its 2017 total.
There are several important areas of export. The top categories include machinery, at $43 billion in exports, electrical machinery, at $41 billion, mineral fuels, at $27 billion, and plastics, at $17 billion. Vehicles are also a major export category, accounting for about $21 billion worth of exports to Mexico in 2017. Among the most popular vehicles exported to Mexico are those by Ford Motor Company (F) and Chrysler (FCAU). The latest negotiations saw both sides agree on rules that require 40-45% of each vehicle to be made by workers earning at least $16 per hour, in order to discourage U.S. auto makers from setting up plants in lower-wage Mexico.
On the imports side, Mexico was the second-largest supplier of goods imports to the U.S. in 2017, with a total of $314.3 billion in goods imported that year. U.S. imports from Mexico made up more than 13% of overall U.S. imports that year.
Some of the most important categories for imports from Mexico include vehicles, with about $84 billion, electrical machinery, with $62 billion, machinery, with $54 billion, optical and medical instruments, with $14 billion, and mineral fuels, with $11 billion. Additionally, there were about $25 billion in agricultural product imports from Mexico, divided between fresh fruit and vegetables, wine and beer, snack foods, and processed fruit and vegetables.