When it comes to international trade, there are a few elements that can help to determine the success or failure of the relationship between nations: the ease of imports and exports, the laws and regulations surrounding an exchange of goods and services, and the fees and taxes that go along with exchanging goods between countries.
In 1994, the governments of the USA, Canada, and Mexico realized the benefits which could come with freeing up trade between their nations, and the North American Free Trade Agreement (NAFTA) was born. In 2018, this legislation was updated to the United States-Mexico-Canada Agreement (USMCA), to reflect a growing, evolving world.
One of the main aims of NAFTA, and later USMCA, was to ensure that free trade was encouraged and incentivized between the three nations. According to official stats, the USA relies on Mexico far more than Canada when it comes to importing products. The United States imported an eye-watering $372 billion worth of products from Mexico in 2018—a sum which was greater than the trade total with Canada. The majority of imported products occurred in the form of cars. According to research, the US imported $93 billion worth of cars or individual car parts from Mexico in a single year. Involved in this was $22 billion worth of engines, $5 billion worth of chassis, and $5 billion in car seats.
While cars and the automobile industry form the largest element of Mexican imports, they are far from the only industry taking advantage of the trade agreement with our neighbor. There are a range of other things we import from Mexico, and these include:
Tech equipment forms the second largest category of goods imported into the United States from Mexico. A total of $26 billion in computers and computer parts, software and semiconductors were imported in a single year. In addition, smaller electronics such as vacuums, phones, televisions, and electrical parts made up a total of $64 billion worth of tech equipment imported into the US in 2018.
2019 saw around $7 million worth of fresh vegetables, $5.8 billion worth of fresh fruit, $2.2 billion worth of snack foods, $1.7 billion of processed fruits and vegetables, and $3.6 billion of wine and beer imported into the United States from Mexico. The nation is the biggest source of agricultural imports into the USA. Perhaps unsurprisingly, avocados form one of the most popular vegetable imports from Mexico, fuelled largely by the trend for Insta-worthy photos. Onions, bell peppers, and tomatoes follow closely behind. One third of all agricultural products in the US are imported from Mexico—a seriously impressive figure!
Machinery And Mechanical Parts
The Mexican manufacturing industry is booming, and 2018 saw the United States import $63 billion worth of machinery, mechanical appliances, and mechanical parts from Mexico. The most popular appliances included refrigerators, washing machines, and air conditioning units. In total, 30% to 44% of all imports in this category enter the US from Mexico each year.
Perhaps one of the most unexpected categories of imports from Mexico is medical instruments. This category reaches a total of $15 billion per year.
The United States operates as one of the largest producers of crude oil in the world, but it is still not enough. The consumption and demand in this country far exceeds production. As a result, Mexico is one of the largest suppliers of mineral fuel into the country, with fuel choices including coal, petroleum, and natural gas.
In the current market, Mexico stands as one of the most integral elements of the US economy and looks set to become the largest trade partner the US has. The creation of North American Free Trade Agreement (NAFTA) in 1994 saw the creation of supply chains stretching from Canada across the United States and into Mexico. It was also the beginning of a jump in Mexico’s GDP due to the unprecedented growth of the manufacturing industry in Mexico that resulted from the trade agreement.
NAFTA, later updated to the United States-Mexico-Canada Agreement (USMCA), aimed to promote and incentivise free trade across North America through the reduction of tariffs. According to experts, tariffs would be disastrous for the economy of Mexico.
If a tariff were imposed on Mexican imports, producers would likely pass the additional tax onto the consumer, making goods more expensive, and reducing the appeal for the consumer.
Low, affordable import taxes are important for the Mexican economy, and are also good news for businesses expanding to Mexico. Producing an in-demand product with low import tariffs boosts your profitability and helps to ensure that your business remains viable even as the economy shifts.
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