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US Election and Mexico’s Aerospace Industry

Fri, 11/06/2020 - 09:58

As Mexico’s strongest trading partner, major decisions in the US could have a strong influence on the local economy and manufacturing activities. As the US elections quickly draw to a close, it might be interesting to analyze what the victory of either candidate will mean for the local aerospace sector.

During his four years at the White House, President Donald Trump touted an “America First” policy, vowing to put the needs of the US ahead of international concerns. This approach resulted in numerous tariffs on foreign products, which aimed to reduce the US’ trade deficit with other nations. In 2018, the US imposed a 25 percent tariff on steel and a 10 percent tariff on aluminum to many countries, including Mexico. These tariffs were lifted for Mexico and other countries in May 2019 but President Trump later warned that he would pursue a 5 percent tariff on all imports from Mexico that would gradually increase until illegal immigration stopped. These tariffs did not materialize. On the contrary, US tariffs on Chinese products and USMCA have helped Mexico become the US’ main trade partner.

President Trump was also behind the renegotiation of the NAFTA agreement which now became USMCA. This has been considered positive for Mexico’s aerospace sector. “We are living a moment of opportunity and the start of the USMCA commercial agreement should help us think beyond geographical borders,” said Carlos Robles, Vice President of the Central Region at FEMIA.

Trump’s contender, Joe Biden has showed support for USMCA and even stated that it was better than NAFTA. While Biden has criticized Trump’s policies in the past, the former Vice President is not expected to implement significant changes in current foreign trade policy as he has also backed a “Made in America” platform that aims to support US-made products.

Considering that most of Mexico’s aerospace exports head towards the US, trade and tariffs between both countries could influence the development of the local industry. Mexico has built a strong aerospace sector over the past 15 years thanks to investment from the US and the EU. The country’s latest data puts exports as US$9.5 billion thanks to the more than 300 aerospace companies established in the country, many of them from US origin including Honeywell and Textron Aviation, among many others.

Despite rhetoric, current manufacturing trends seem to favor Mexico’s aerospace industry, especially now that the COVID-19 outbreak is drawing increasing attention to nearshoring. “Terms like reshoring and nearshoring are starting to appear more and more as a response to the lessons we are learning from the moment we are living,” said Robles.

US elections are quickly drawing to a close. At the time of writing, former Vice President Joe Biden had 264 electoral votes, while incumbent President Donald Trump had 214. Either candidate needs to reach 270 votes to win the presidency.