On economic relations between Mexico and the United States

Vie, 08/01/2025 - 19:05 -- jdiaz

On economic relations between Mexico and the United States

            Fidel Aroche Reyes

UNAM

aroche@unam.mx

 

In 2025, the US government is threatening to impose tariffs on trade with Mexico, hoping to affect the Mexican economy and gain some additional advantages from such exchanges. As is well known, virtually all Mexican exports are destined for the United States, and a large part of them are the product of so-called value chains, in which Mexico is basically involved in the assembly and packaging of the final products. The reaction of the Mexican authorities and press suggests that something serious could indeed happen in the country.

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It is true that since the 1990s, Mexico has sought to intensify its relations with the United States at all levels, despite the fact that differences in size and level of development have placed it at a disadvantage. The argument has been that a closer relationship would guarantee access to the world's largest market and, at the same time, lead to a plethora of direct investment. Growth in exports and investment would allow Mexico to grow rapidly. Curiously, the hypothesis that Mexican growth has been constrained by a lack of markets has not been proven, and therefore, the association with the United States would not solve anything.

The reality is that the Mexican economy has grown at an average rate of 1% per year from 1982 to 2024. This points to a stagnant system. The association with the US has provided little to Mexico in growth terms. As a result of this stagnation, by 2025 half of the working-age population will not find employment in the formal sector, and those who can will emigrate, while the rest will find employment in very low-productivity activities. Hence the inequality. Perhaps structural unemployment also explains why part of the population is engaged in illegal activities, some of which appear to be very profitable. 

The general attitude of successive governments and the Mexican elite over the last 43 years has been to ignore economic reality. It has been sufficiently demonstrated that export growth, or its performance, does not determine the course of the economy, except marginally. However, various government officials, as well as the press (almost unanimously), have declared little less than a state of emergency in the face of a possible reduction in exports, given that (they believe?) demand for these products will contract and thus national production will decline.

However, it would be necessary to consider the effects of such tariffs imposed by the US government on its consumers. Firstly, it is true that Mexico has managed to concentrate its economic relations to a greater extent with that country; there seems to be no other country with which it could have similar relations. Secondly, Mexican manufacturing exports originate in global production chains. For example, in order to produce cars or electronic devices for export or for the domestic market, the country imports almost all of the components from Asia, which are assembled in factories that offer poor working conditions and low wages to their employees. These plants have been set up with very low levels of investment. Production is largely destined for the US, which, if it imposes tariffs (there), will increase prices (there). It is not easy to quickly move production of these goods there. In any case, exports do not determine economic dynamics, as can be seen in the graph; on the contrary, if exports ( to the US) grow, imports (from China) must also grow.

The country's agro-industries may produce more autonomously than industrial companies, and tariffs would mean an immediate increase in the prices of their products in the US; nor do these products appear to be easily replaceable. From the Mexican point of view, these exports may not be able to find other markets easily, but it would be necessary to consider whether there are genuinely no other markets with better conditions, such as the agreement signed in July 2025 for the sale of avocados to Brazil.

Mexico's subordinate relationship with the US is not inevitable, nor is it immutable. It is the result of decisions that may have seemed reasonable at some point in history, but which can be changed at any time if it suits the country.

In short, as a result of its close trade relationship with the US, the Mexican economy has remained stagnant and dependent on a maquila and primary export model that has failed to generate sustained growth or well-being for the majority of the population. Possible restrictions by the US could not only affect Mexican exports, but also expose the country's vulnerabilities due to its dependence on a single trading partner. However, it opens the door to market diversification and the reorientation of economic policies that could be transformed if required by the national interest.

Palabras clave: 
Tema de investigación: 
Integración y comercio