Mexico’s Moment: The Biggest US Trading Partner Is No Longer China
Mexico’s Moment: The Biggest US Trading Partner Is No Longer China
Investments from Tesla, BMW and others along with the new Cold War have transformed Mexico’s economy.
The new Cold War is a business opportunity, and Mexico looks better placed than almost any other country to seize it.
US-China tensions are rewiring global trade, as the US seeks to reduce supply-chain reliance on geopolitical rivals and also source imports from closer to home. Mexico appeals on both counts—which is one reason it’s just overtaken China as the biggest supplier of goods to the giant customer next door.
On top of resurgent exports, Mexico boasts the world’s strongest currency this year and one of the best-performing stock markets. Foreign direct investment is already up more than 40% in 2023, even before Tesla Inc. starts building a proposed $5 billion factory. Not since the signing of the North American Free Trade Agreement in the 1990s has the country held the kind of allure for investors that it has right now.
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The stronger the Mexican economy is, the better for everyone.
Less Mexicans trying to jump the boarder and enter the US illegally because they can more readily find jobs in Mexico. The more opportunities in legitimate work for Mexicans, means less pull by drug cartels to recruit young Mexican teens to enter the drug trade.
Having a strong partner with Mexico means less reasons for US companies to set up shop in China.
I am sure everything isn't totally on the up-and-up, but I would be willing to bet that Mexico has more respect for intellectual property and patents than China ever did, and that was a huge issue for American companies which would constantly have their designs stolen.
Having a lower-cost supplier right next door makes American companies more competitive on the world stage. Companies are always looking to cut costs. So if they can save 10 or 20% on component X by getting it made in Mexico, that makes their larger product that much cheaper when they are competing with the Germans and Japanese.
Lastly, American companies can compete with Mexican companies by being more efficient. That wasn't necessarily the case with Chinese competitors who didn't really care about safety rules and used near slave-labor rates. An automated US plant can be competitive to a lower-tech Mexican one, and that is a very good thing for keeping US manufacturing alive.
These are all some of the reasons that Clinton signed the Free Trade Agreement almost 30 years ago. We are literally going back in circles here and continuing what he was trying to do way back then.
Good analysis. Although one thing to note here:
Less Mexicans trying to jump the boarder and enter the US illegally because they can more readily find jobs in Mexico.
The net migration rate of Mexicans coming in and also leaving the US is fairly stable and has been for a couple decades. The main source of inmigrant for the US is Central American countries. But your point still stands that a stronger Mexican economy likely means less immigration to the US from those nations since it would be easier to simply go to Mexico where they speak the language.
simply go to Mexico where they speak the language.
That's exactly it. Why jump the fence and go to the US making $10/hr but always being under the threat of being arrested and deported as well as not knowing the language, or go to Mexico (maybe) legally and work in a factory there making $3/hr (but also a much lower cost of living as well).
It's because the US dollar is currently worth 17.14 Mexican pesos, and currently worth (as an example) 7.87 Guatemalan dollars, meaning they are functionally making less money in Mexico.
Keep in mind a lot of these migrants are men who send money home to their families, so exchange rates matter hugely.
NAFTA was signed by Clinton but began as an idea under Reagan. Bush 41's team mostly drafted it for America.
I love how Republicans use NAFTA as some kind of evil thing to blame on Clinton, but it was a good idea back then and it is a good idea today. Regardless of when it was originally thought of. Trade is not bad. Unfair trade is bad.
BUT MEXICO BAD