Trade With Mexico: Behind the Numbers
The United States-Mexico relationship has been rocked in recent days, first over the issue of the border wall and then over issues of trade.
After Mexican President Enrique Pena Nieto cancelled a meeting in Washington this week with President Donald Trump because he refused to discuss paying for a border wall between the two countries, the two leaders had what was described as a friendly discussion on Friday.
But Trump on the very same day doubled down on his attacks against the imbalance in US-Mexico trade. “Mexico has taken advantage of the US for long enough,” the president tweeted, on Friday. “Massive trade deficits & little help on the very weak border, must change, NOW!”
Drilling down into the numbers shows that US trade with Mexico is not be as lopsided as Trump would have people believe. Bilateral trade in goods and services was estimated at $583 billion in 2015, according to numbers released by the United States Trade Representative. Of that, total US exports to Mexico totaled to $267 billion, while Mexican imports to the United States were $316 billion—leaving the US with a $49.2 billion overall trade deficit.
But that’s not the entire story. In the category of professional services, the US ran a surplus. Trade in services between the two countries was $52.4 billion in 2015, with the US exporting $30.8 billion in services and taking in $21.6 billion from Mexico, for a US surplus of $9.2 billion. The top service categories include travel, transportation, and computer software.
Mexico is the second largest export market for the US, supporting an estimated 1.1 million jobs in the US. Since signing NAFTA in 1994, US exports to Mexico have increased 468 percent, accounting for nearly 16 percent of all US exports.
Also, because trade between the two countries is complicated, the numbers don’t tell the entire story. In the case of auto parts, the US imported $340 billion over a five-year period, but, of that, $136 billion were exported back to Mexico, where they were used to manufacture cars that are sold back to the US.
Since NAFTA, US automobile producers have created a continental supply chain, with Canada and Mexico providing parts and some assembly, a fact that has become important to the competitiveness of the US auto industry. Disrupting that trade is unlikely to bring back American jobs.
Mexican goods bound for the US include vegetables, fruit, and beer. Imposing a border adjustment tax for Mexican goods, as has been floated by the Trump administration, could hurt Mexican producers, but would also raise prices for US consumers.
Soybean Prices are a Proxy for How the Trade War is Going