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A Threat to EM Exports

The Mexican and U.S. economy intrinsically linked. Mexico has experienced significant growth in cross-border trade with the United States since the 1960s, largely due to the development of maquiladoras and the official launch of the Border Industrialization Program (BIP) in 1965. Maquiladoras are factories situated in Mexico, typically near the U.S. border, that import raw materials and components for assembly or processing before exporting the finished goods to the United States. The signing of the NAFTA agreement in 1994, which united the U.S., Mexico and Canada, further bolstered the economic ties among these three countries.

Beyond the manufactured outputs of maquiladoras – such as automobiles, household appliances, and electronic products – Mexico exports a wide range of goods to the United States, including petroleum (some of which is refined in the U.S. and re-exported to Mexico), as well as agricultural products such as avocados, tomatoes and berries.

Decades of economic integration have made Mexico heavily reliant on its North American neighbor, with exports to the U.S. comprising more than 75% of Mexico’s total exports, and about 27% of its GDP. The trade surplus Mexico enjoys with the United States represents 18% of the total trade volume between the two countries (exports + imports) and accounts for nearly 13% of Mexico’s GDP. Considering these figures, an increase in tariffs by the US administration would have severe repercussions for the Mexican economy, along with significant impacts on prices for American consumers.