On The Bilateral Trade Between USA and Mexico

Mexico is one of the three important trading partners of USA. The Southern neighbor is not only a major exporter of goods to the US market, but the U.S. also exports a substantial amount of goods to Mexico. The following table shows the major trade partners of the US:

Click to enlarge

Source: A Seaworthy Mexico into the Maelstrom by Pablo Echavarria, CFA, Thornburg Investment Management

Mexico had a trade deficit of about $60 billion with the US in 2016 compared with a trade deficit of $366 with China. Mexico is the 2nd largest export market for US after Canada.

From the above article:

Nomura recently calculated the imports/exports ratio for several U.S. trading partners (a measure of balance in bilateral trade relations.) Mexico’s ratio is 1.27x (that is, for every $1.27 of goods imported into the U.S. from Mexico, the U.S. exports $1 of goods to Mexico). That compares favorably to the ratios of the U.S.’s other main trade partners: China at 4x; Korea at 1.7x; and the Eurozone at 1.5x. Moreover, one U.S. Class 1 railroad company running between the U.S. and Mexico recently reported that approximately 60% U.S./Mexico traffic is southbound, and added that it’s actually growing faster than northbound traffic. (emphasis mine)

So the key takeaway is trade with Mexico is not a one-way street meaning it is not just Mexico that is benefiting from sending goods to the US market. This important fact is not widely mentioned as Mexico becomes the target of the current political climate. As noted above U.S. also benefits from selling a lot of goods to Mexico. Hence trade war with Mexico will adversely both countries and not just Mexico.

Also see: The US shouldn’t blame Mexico for “losing” at trade — it should blame Germany, FT Alphaville

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