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Former President Donald Trump drew intense criticism from many in the international community for his protectionist stance and strict adherence to an “America First” agenda on the matter of trade.
Among other concerns for the Trump administration, one of the primary targets of the former president’s ire was the North American Free Trade Agreement (NAFTA). Signed in 1994, the agreement established a trilateral trade bloc among Canada, Mexico, and the United States.
Following months of negotiations, the updated United States-Mexico-Canada Agreement (USMCA), sometimes referred to as the “new NAFTA,” came into effect on July 1, 2020.
In many respects, the USMCA is very similar to NAFTA, but it makes several important updates to the earlier agreement to reflect changes in trade over the past three decades. Among these are changes to intellectual property protections, regulations for the trade of automobiles and parts, and protections regarding labor laws.
While the USMCA is still in its infancy, there is little question that trade with Mexico is a crucial feature of the U.S. economy as well as foreign policy. Below, we explore how much the United States trades with Mexico.
Key Takeaways
- The North American Free Trade Agreement (NAFTA) was a landmark treaty for free-market commerce between the U.S., Canada, and Mexico.
- Some Americans saw NAFTA as giving an unfair advantage to the other two nations and strongly opposed the policy.
- President Trump took aim at NAFTA, replacing it with the United States-Mexico-Canada Agreement (USMCA).
- In 2019, Mexico became the largest trading-goods partner with the United States. In 2020, Mexico fell to second place after China.
- The trade balance with Mexico went from a surplus of $1.7 billion in 1993 to a deficit of $112.7 billion in 2020.
Trading Partner
In 2020, Mexico fell to being the second-largest merchandise trading partner with the U.S., behind China. Amid the COVID-19 pandemic, 2020 trade between the countries resulted in a substantial decrease in total bilateral merchandise trade to $538.1 billion, down from $614.5 billion in 2019, when Mexico was the largest merchandise trading partner with the U.S.
Merchandise exports in 2020 were $212.7 billion. Merchandise imports in 2019 (the latest figure available) were $359 billion. The trade balance with Mexico went from a surplus of $1.7 billion in 1993 to a deficit of $112.7 billion in 2020.
The main exports to Mexico are petroleum and coal products, motor vehicle parts, semiconductors and other electronic parts, computer equipment, and basic chemicals. The main imports from Mexico are motor vehicles, motor vehicle parts, computer equipment, audio and video equipment, and electrical equipment.
In regards to services, the U.S. had a surplus of $3.1 billion in 2019. The total value of services exports was $32.9 billion. Imports were $29.8 billion. The bulk of services between Mexico and the U.S. are travel, transportation, business, and financial services.
Foreign Direct Investment
Foreign direct investment is a big component of the U.S.-Mexico relationship. The stock of U.S. foreign direct investment in Mexico was $100.9 billion in 2019. The stock of Mexican foreign direct investment in the U.S. was $42.9 billion in 2020.
$9.9 Billion
Mexico’s GDP in 2021, which is expected to grow to pre-pandemic levels by 2023.
Foreign direct investment on both sides has greatly increased after NAFTA passed and when Mexico liberalized foreign investment restrictions in the 1980s and 1990s.
What Is the U.S. Trade Deficit With Mexico?
The trade deficit with Mexico in 2020 was $112.7 billion.
What Are the Top Exports From Mexico to the United States?
The top exports from Mexico to the United States are motor vehicles, motor vehicle parts, computer equipment, audio and video equipment, and electrical equipment.
What Are the Largest U.S. Exports to Mexico?
The largest U.S. exports to Mexico are petroleum and coal products, motor vehicle parts, semiconductors and other electronic parts, computer equipment, and basic chemicals.
The Bottom Line
Sharing the border, the United States and Mexico have a close relationship. Mexico is one of the largest trading partners with the U.S., often taking the number one or two spot in terms of value traded. Trade improved drastically between the two nations after the passing of NAFTA in the 1990s. It remains to be seen how trade relations will continue after NAFTA was replaced with USMCA.
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