For years, America’s top trading partner has been – perhaps unsurprisingly – China. That all changed this year as Mexico eked out the top spot, in a trend that appears to be continuing.
Between supply chain issues, “nearshoring” and plain old geopolitical tension, Mexico has in the past few years made up a growing share of U.S. imports.
Raymond Robertson, professor of international affairs at Texas A&M University’s Bush School of Government and Public Service, spoke with the Standard about the forces behind the shift, and how it may benefit the Texas economy.
This transcript has been edited lightly for clarity:
Texas Standard: Let’s talk numbers here. How does U.S. trade stack up with Mexico compared to China? And how have things differed from previous decades?
Raymond Robertson: Well, as you’ve mentioned, China is now falling a little bit precipitously, actually, because of recent controversies, trade policies and frictions. And the amount of imports we’ve had from China has been declining since the COVID pandemic. Mexico, on the other hand, has been creeping up gradually for much of the last decade, and now it’s finally surpassed China.
What’s behind this shift? I’ve been hearing a lot about onshoring – you know, moving a lot more production away from China and closer to the U.S. Is that a big factor here, or not so much?
I think it turns out to be one of the driving factors, actually. One of the reasons is that the driving frictions that we’ve had with China have made producers in China have to look elsewhere. They don’t like friction with the government, and they don’t like being in a spotlight that puts them in an unfavorable light.
At the same time, we also saw that during the pandemic, you remember there was lots of supply chain disruptions, and people are feeling that moving to Mexico could help smooth those out.
Well, what are some of the industries that have seen the most growth in Mexico, by your reckoning?
Actually, automobiles has been the No. 1. Automobiles and computer parts, microchips, that sort of thing are the ones that are growing the fastest.
Is Mexico equipped to handle this rapid growth?
Well, that’s a great question. And I think we’ve seen an explosion of real estate activity along the northern border where they want to produce stuff. But there’s been some concern about shipping, trucking, whether or not we have the infrastructure to handle it. And I think that’s something they’re keeping an eye on.
What sort of benefits would this mean for Mexico? I would guess more revenue, for example, right?
Absolutely. More revenue and particularly more jobs. There’s been a concern that with rising unemployment in Mexico, people need a place to go and they’re either going to find a job in Mexico or look towards the north to see if they could come up here to find something. And more jobs in Mexico means less migration as well.
Is it easier to set up shop in Mexico than it is the United States, generally speaking?
I don’t think so. I think there’s been a new regime in Mexico which hasn’t been as friendly to business as other regimes have been in the past. There also are concerns about energy prices and electricity availability. But the big draw, of course, is it’s a lot cheaper because labor costs are lower.
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What does this mean for the Texas economy in particular, especially given its proximity?
Oh, I think this is great news for the Texas economy. Texas is the No. 1 exporter to Mexico.; it’s the No. 1 exporting state in the country. And I think that the amount of economic integration between Texas and Mexico is unsurpassed. It’s absolutely critical for our state’s economy.
Well, I’m curious about how long this arrangement might might last – I mean, Mexico as the top trading partner. There have been demographic trends, some issues in real estate in China that have been grabbing some some of the front pages of the business papers. Is China going to bounce back, do you think, or are we talking about a long-term partnership with Mexico that’s being profoundly changed here?
Yeah, that’s a great question. I think what we saw was the rising frictions with the last administration that have continued through the current presidential administration triggered a shift, and that it’s very slow to actually move production. But now that it’s started to move, it’s going to be hard to reverse it. So I think this is going to be a long-term trend.