The US-China Trade Crisis is Over; Mexico is a Likely Winner

 

After almost 22 months of threats, tension and tariffs, yesterday the US and China finally signed Phase 1 of a new trade deal, ending the uncertainty that has impacted markets worldwide. The world’s two major economic powers will continue to advance their talks though some tariffs are likely to stay in place.

Since the start of the crisis in March 2018 when President Donald Trump announced tariffs on Chinese commodities (25 percent on steel and 10 percent on aluminum), there has been speculation around which nations would benefit. Mexico has been always on this coveted list.

According to a BBC report, the reputations of President Trump and China’s President Xi Jinping will be bolstered by the signing of the new trade agreement. Both presidents have enjoyed the support of their citizens over their handling of the situation despite US companies and consumers being among the hardest hit by the economic fallout.

Analysts say the new agreement is unlikely to produce the economic gains necessary to overcome losses each country has already suffered. Economists estimate the trade war will trim 0.5 percent off global growth.

Several countries have benefited from estimated US$165 billion in trade that was redirected as a result of the squabble. BBC reports that Nomura analysts identified Vietnam as the country that gained the most, while the UN said that Taiwan, Mexico and Vietnam saw increased trade from the US last year. According to the US Federal Reserve, increased US trade boosted Mexico's economic growth by more than 0.2 percent.

With at least three Chinese automakers preparing to begin production in Mexico or expanding existing operations, Mexico exports look set to receive another boost. During a visit to Mexico City, José Luis Bernal, Mexican Ambassador to China, said that carmaker Changan, electric carmaker BYD, and Anhui Jianghuai Automobile, known as JAC, were actively eyeing new production facilities in Mexico. Changan and BYD don’t have production facilities in Mexico, while JAC already produces vehicles in the country.