Can Mexican Exports Save the US Retail Sector?

The COVID-19 crisis has complicated the economic situation of some of the most important US retail giants, such as J. Crew, JC Penney, Neiman Marcus and Macy’s. These companies were forced to close their stores due to the pandemic and in many cases did so without a robust plan to boost their e-commerce departments that had large accumulated debt. Yesterday, the National Retail Federation (NRF), the nation’s largest retailer association, issued another wake-up call. According to a report by the NRF published by Bloomberg, imports from major US retail players at container ports fell in March to their lowest level in five years. “There are still many essential items that are badly needed and due to store closures, cargo may remain longer than usual and cause other impacts on the supply chain,” said Jonathan Gold, NRF’s Vice President, in a press release.

In this context, Mexico has the opportunity to become the US’ great ally in terms of exports. According to Robert Lighthizer, US Trade Representative. USMCA, the new free trade agreement between Mexico, the US and Canada, will come into force on July 1. According to Lighthizer, the agreement could provide an economic boost to all parties during the COVID-19 crisis. “The crisis and the recovery from the COVID-19 pandemic show that now, more than ever, the US should strive to increase manufacturing capacity and investment in North America,” said Lighthizer in a statement published by El Universal.

Unlike other major textile markets, such as Bangladesh, India or Morocco, the Mexican textile industry encompasses the entire supply chain, from cotton harvesting and textile fiber development to the production of finished products. This industry, together with the upcoming enforcement of USMCA and the commercial and political war between the US and China, the world’s leading textile manufacturer, gives Mexico a certain advantage in the current context. The COVID-19 crisis has halted the supply chain of many countries, including the US. However, Mexico continues to be one of its main trading partners in textile exports.

Food exports from Mexico to the US could also play a very important role. This is what Juan Ley, President of Mexican Beef, Mexico’s leading livestock association, believes. Some of the US main meat processing plants have been affected by outbreaks of COVID-19, which has led fast food chains like Wendy’s to announce the possibility of some of their main items disappearing from the menu. According to Mexican Beef, considering the current context and new security measures adopted by the US industry, this could lead to a 12 percent increase in meat exports from 2019 to the US by the end of 2020. According to the US Department of Agriculture, meat exports totaled 87,000 tons between the beginning of the year and the first week of May, representing an increase of 8,000 tons over the same period last year. In addition, Mexico closed 2019 as the third largest meat exporter to the US, behind Australia and Canada. “Agricultural trade continues to flow. The government closed the borders for tourism but not for trade. Essential sectors continue to send goods, particularly agriculture,” Graciela Márquez, Mexico’s Ministry of Economy, said recently.