Emelio Zapata. Public Domain. Source: Wikimedia
Mexico runs a trade surplus with the US. Global supply chains mean that many component parts are shipped to Mexico from all over the world, assembled, and then exported to the US. Historically, Mexico also exported oil to the US. But that’s changed over the past few years.
From 2006 to 2014, Mexico exported around $35 billion per year in energy products to the US. But then the value and volume of those exports fell dramatically. By 2016, Mexico only exported $9 billion to the US. And US exports to Mexico soared, to over $20 billion. The US went from having an energy deficit with Mexico to an energy surplus.
Mexico is second only to Canada in energy trade with the US. Crude oil makes up most of Mexico’s exports to us, while refined products make up most of our exports to them.
But did their lack of oil exports lead to a collapse of the Mexican economy? Far from it. Mexico’s exports shifted from petroleum to non-petroleum. The change started in 2009, but has accelerated since then. Overall, Mexico’s trade surplus with the United States has grown from $20 billion in 2000 to around $130 billion in 2017. The automobile industry is by far the most important factor in cross-border trade, with Mexico exporting, on net, over $50 billion in cars and trucks to the US – assembled from US-made parts.
Source: Federal Reserve Bank of New York
As Mexico has run a trade surplus with the US, they have run an offsetting trade deficit with China and the rest of Emerging Asia. This has supported the continued expansion of the Mexican economy, which has been growing consistently since the Great Recession ended in 2010, and has just recently slowed modestly.
Source: St. Louis Fed
Mexico’s economy is far more diversified now than it was in prior years. Trade relations have shifted, and their need for gasoline, diesel fuel, and natural gas has grown as their imports from Asia also have gone up. As US officials consider trade relations with our North American partners, it’s important to realize that Mexico does a lot of importing as well as exporting. Today’s fixed reality can quickly become yesterday’s old news.
Douglas R. Tengdin, CFA