Mexico's Exports Up 2.3 Percent Driven by US Trade

Mexico's exports grew 2.3 percent in December 2019 compared to December of the year previous, INEGI has reported.

The US$5.82 billion trade surplus recorded in 2019 was a dramatic improvement on the US$13.61 billion deficit seen in 2018 and was driven by the increase in exports of manufactured goods (up 3.4 percent) and non-oil exports (up 4.7 percent) to the US.

A higher surplus balance for non-oil products was recorded last month, rising from US$9.543 billion in 2018 to US$27.042 billion in 2019, while the petroleum products deficit was reduced from -US$23.160 billion in 2018 to -US$21.222 billion in 2019. Imports of petroleum products dropped 1.9 percent in the same period.

The highest increase in exports were in food, beverages and tobacco products which offered a rise of 9.6 percent. Mining products (6.3 percent), machinery and special equipment (5.9 percent), and automotive products (2.7 percent) followed.

INEGI’s December report was released just hours before the USMCA was finally signed by US President Donald Trump. This milestone is expected to have major implications in the automotive sector.

Among the changes brought in by the USMCA is the goal to incentivize car production in North America, opening a window of opportunity for more regional content but also likely impacting the exports of manufactured goods to the US.

While USMCA predecessor NAFTA required automakers to produce 62.5 percent of a vehicle’s content in North America, the new agreement will gradually grow that figure to reach 75 percent. This, according to US analysts, is designed to act as a protection against European and Asian cars that now have zero tariffs for being assembled in Mexico. The pact also requires 70 percent of a vehicle’s steel and aluminum to be produced in North America.

New labor rules are also expected to impact the trade balance among regional partners. Parts for any tariff-free vehicle must come from factories required to pay US$16 an hour on average to workers. This will either force automakers to buy from Canada or US factories who pay the established wage, or somehow increase the wages of Mexican workers.