US-Mexico Cross-Border Trade Poses Opportunities, Challenges

Cross-border trade between the United States and Mexico has witnessed remarkable growth in recent years, cementing Mexico's position as the United State’s top trading partner. This trend indicates the strong economic ties between both nations, with opportunities and challenges arising in the dynamic landscape of cross-border trade.

Just during 1Q23, bilateral trade between both countries amounted to US$263 billion, accounting for over 15% of total US trade. The customs brokerage market in Mexico plays a pivotal role in facilitating seamless cross-border trade. This market is estimated to be worth US$325.93 million in 2024 and is projected to grow at a compound annual growth rate (CAGR) of 6.05% by 2029, according to Mordor Intelligence. While numerous brokers operate along the border, major players control a significant portion of the market.

The growth of imports is a prime driver for the customs brokerage market. In 2022, Mexico's overall trade with the United States increased by 12%, totaling US$64 billion. The top US exports to Mexico included petrol, motor vehicle components, computer chips, liquified natural gas, and low-value shipments. Major Mexican exports to the United States included commercial vehicles, passenger vehicles, motor vehicle parts, computers, and oil.

The growth of the Mexican transportation services industry has made Mexican exports competitive, reaching a value of US$590.93 billion in 2022. The USMCA further solidified trading relations, with 84% of Mexico's exports going to the United States and Canada. The bulk of the Mexican freight industry relies on road freight, which held a share of 55.8% in 2021.

Infrastructure Investment Needed to Boost Land Transportation

The success of cross-border trade relies heavily on robust infrastructure. Initiatives such as the Mexico-Texas Corridor, connecting Nuevo Leon with Texas, and the ongoing developments in the Otay Mesa II Port of Entry demonstrate the commitment to enhance trade, cargo movement, and tourism between Mexico and the United States.

Demand for truck transportation has increased in recent years, highlighting the importance of enhancing cross-border infrastructure. Texas’ Port Laredo, which includes the World Trade Bridge, the Colombia Solidarity Bridge, the Laredo International Airport, and others, was the top trade gateway between Mexico and the United States, according to an analysis made by World City. Trade at Port Laredo was valued at US$262.9 billion in October 2023. By value, the Ysleta-Zaragoza International Bridge followed in second place with US$61.6 billion, with the Otay Mesa Freeway Border Crossing in third place with US$52.1 billion. 

According to the US Department of Transportation, the World Trade Bridge is the most important truck crossing on the US-Mexico border, representing over 60% of the truck traffic crossing the border between Texas and Mexico. However, if infrastructure enhancements are not made soon it is expected that by 2050, delays are set to cost Mexico US$11.2 billion and the United States US$16.8 billion. The Texas Department of Transportation (TxDOT) argues that crossing the bridge could take up to 8 hours and 47 minutes by that year, while in 2022, waiting times did not surpass 58 minutes.

To prevent future delays, the Government of Tamaulipas, Nuevo Leon, and Laredo are introducing bipartisan efforts to expedite the expansion of the World Trade Bridge and the Colombia Bridge. The planned expansions aim to streamline the permit process, potentially benefiting the entire border region. The legislation, included in the US National Defense Authorization Act for the Fiscal Year 2024, is set to facilitate the expansion of these bridges, optimizing the flow of goods valued at over US$850 billion.

Trade and Infrastructure: Keys to Attract Nearshoring 

While bullish scenarios show that nearshoring is expected to generate large opportunities, new investments represented only 8% of the FDI Mexico received in the first nine months of 2023. Mexico ranks seventh in nearshoring, with Vietnam leading the way. To enhance Mexico's position, crucial measures such as fiscal incentives, robust infrastructure plans, and active engagement with authorities at both national and regional levels are essential.

Other major challenges include the transportation sector's unemployment rates. According to CANACAR, the shortage of cargo truck drivers in Mexico will double by 2028 if significant measures are not implemented, increasing from 56,000 to 106,000 vacancies. 

At the same time, the migration crisis has caused temporary closures of key border crossings, disrupting supply chains and emphasizing the intricate relationship between logistics, human rights, and global sustainability goals. However, the measures that have been implemented by the US Customs and Border Protection (CBP) Office of Field Operations potentially violate the USMCA’s provisions regarding the free transit of goods and merchandise, argues the Mexican Confederation of Industrial Chambers (CONCAMIN). 

Elections to Set the Path of Trade

The upcoming elections in Mexico and the United States may shape the direction of cross-border trade policies. The USMCA's first review in July 2026 will also play a crucial role in defining the future of trade relations. Striking a balance between trade agreements and addressing challenges like migration and security will be essential for a prosperous and stable trading bloc.

Cross-border trade between the United States and Mexico is at the forefront of economic relations, with key factors like customs brokerage, transportation services, and infrastructure playing pivotal roles. Challenges and opportunities in nearshoring, along with ongoing initiatives to streamline border processes, underscore the dynamic nature of this crucial economic partnership. As both countries navigate geopolitical shifts and global trade dynamics, the resilience and adaptability of their cross-border trade relationship will be instrumental in shaping the future of North American commerce.