For the first time, Mexico has become the United States’ top trading partner. According to data from the U.S. Census Bureau, Mexico’s trade with the United States in 2019 reached a total of $614.5 billion of combined exports and imports. That’s a 0.48% increase in trade between the two countries since 2018, cementing Mexico as the U.S.’s largest trading partner.
With the twists and turns that global supply chains have taken in the last year, it’s hardly a surprise that the U.S. has seen new trends among its trading partners. And as Mexico has consistently attracted the attention of manufacturers looking for the benefits of low-cost, high-quality labor with the cost efficiencies of nearshoring, it’s no surprise that Mexico has made it to the top of that list. When you consider that 89% of Mexico’s total exports to the United States are manufactured products, Mexico becomes a clear choice for other manufacturers looking for ways to move their products into this massive market at a low cost.
Trade trends emerging in this turbulent 2020
Global trade is constantly evolving, but the impact of the U.S. tariffs on China in 2018 and 2019, followed by the coronavirus pandemic, has pushed more manufacturers to consider a regional strategy to their offshore manufacturing. By the time negotiations had settled over USMCA and made the “new NAFTA” free trade agreement a certain reality, Mexico had already become a preferred choice for manufacturing operations for companies that had previously focused on low-cost Asian countries.
That may be because there’s much more than cost efficiencies that come in operating out of Mexico. One of the biggest advantages for manufacturers reacting to supply chain interruptions is the ease of entry into Mexico. Working with a shelter service provider has helped many companies cut through regulatory hurdles and speed the process of moving manufacturing from China to Mexicoor other locations, thus driving products’ speed to market.
Mexico’s leading exports
Mexico’s manufacturing communities have developed strong industrial clusters across the country that support the manufacture of key products, including automotive and aerospace components, electronics, and medical devices, among others. Among its many specialties, however, cars lead the list of exports from Mexico. Worldwide, the country shipped nearly $50 billion worth of passenger vehicles in 2019.
Of course, automotive manufacturershave a long-standing presence in Mexico, dating back nearly one hundred years when Buick launched the first automotive production facility here. Today, 12 car manufacturers have operations across Mexico, supported by hundreds of Tier 1 suppliers that, in turn, have attracted dense numbers of supporting suppliers. During the first three months of 2020, Mexico exports to the U.S. of motor vehicle parts and commercial vehicles rose 1.75% and 18.02%, respectively.
In recent years, those supporting suppliers have helped grow new industrial clusters. Electronics suppliers that moved in to support automobile companies are now driving consumer electronics manufacturing. In fact, data indicates that in the first three months of 2020, Mexico’s export of computers to the United States rose more than 7% to $6.57 billion.
And all those complex manufacturing processes have grown Mexico’s reputation for labor that excels in managing the complex assembly of even the most delicate parts, such as those found in the growing medical equipment sector.
While Mexico may be the most important partner to the United States today, representing 15.3% of that country’s total trade, there is competition for that top spot. Canada saw $612 billion in trade, taking a 14.9% share of U.S. trade, and further demonstrating the importance of proximity in trade with the United States. However, Canada and Mexico are supplying very different demands, as Canada’s leading export is oil, making up roughly 20% of its exported goods to the U.S.
In terms of U.S trading partners, China now sits in the third spot with $555 billion in trade, down $100.95 billion from its 2018 trade record. It’s worth noting that when China is removed from the equation, U.S. trade grew in 2019.
A partner with staying power
Given the turbulent start of 2020, many manufacturers may be cautious about making a move just yet. However, Mexico’s rise to a leading U.S. trade partner hardly happened overnight. It’s the culmination of a long relationship and steady support for a strong manufacturing sector.
Much of this support comes from the shelter service providers that help connect manufacturing operations with labor, space, and regulatory and compliance aid so that the manufacturer can focus solely on product and operational quality.
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