There are three key reasons why U.S. companies should consider exporting to Mexico:
- Mexico is the 14th-largest economy in the world and has generally enjoyed slow but stable economic growth since the 1990s. Despite supply chain disruptions caused by COVID-19, global inflation, and geopolitical instability in Europe and elsewhere, Mexico’s economy is expected to achieve steady levels of growth in 2023 and beyond driven by external demand and foreign investment.
- Given Mexico’s large, diversified market, most U.S. products and services have ample market opportunities. The United States-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement (NAFTA) on July 1, 2020, provides additional trade-related benefits for U.S. companies.
- Close cultural, social, and economic ties make Mexico a natural market to consider for first-time exporters and those firms looking for new export markets.
Mexico is the largest Spanish-speaking country in the world. Its USD 1.4 trillion economy is the second-largest in Latin America and the country maintains deep trade and investment ties with the United States. Mexico is an upper middle-income member of the Group of 20 (G20) and the Organization for Economic Co-operation and Development (OECD), with a per capita Gross Domestic Product (GDP) of USD 11,091. Still, Mexico’s two percent average annual GDP growth rate since the signing of NAFTA in 1993 has been slower than most emerging markets, due in part to its high rates of labor informality (56 percent), poverty (44 percent), and declining oil production. Additionally, the country’s economy was hit hard by the COVID-19 pandemic, lockdowns, and the accompanying economic contractions elsewhere in the world. According to the International Monetary Fund (IMF), Mexico’s real GDP growth rate for 2021 was 4.7 percent, which declined to 3.1 percent in 2022. IMF forecasts that Mexico will maintain a 1.8 percent GDP growth rate in 2023 depending on factors such as inflation and supply chain disruptions.
Two-way trade in goods and services between the United States and Mexico totaled USD 863.4 billion in 2022, positioning Mexico as the second-largest overall U.S. trading partner. During this period, U.S. exports to Mexico totaled USD 362.7 billion and imports from Mexico totaled USD 500.7 billion (deficit of USD 138 billion). This large volume of trade directly and indirectly supports millions of U.S. jobs. Mexico is the first, second, or third-largest destination for merchandise exports from over 30 U.S. states. Top U.S. goods exports include electronics, vehicles, fuels, minerals, plastics, and machinery. Mexico was the second-largest export market for U.S. agricultural products in 2022, with total U.S. agricultural exports to Mexico valued at over USD 28 billion.
Mexico is the 17th-largest investor in the United States, having amassed a total stock of USD 54 billion at the end of 2022. U.S. affiliates of Mexican-owned firms in sectors such as food, communications, plastics, metals, auto components, and business services employed 85,700 U.S. workers in 2018 (the most recent year for which figures are available). Over the last 20 years, U.S. and Mexican supply chains have become increasingly integrated and production sharing —with intermediate steps in the creation of a final good taking place on both sides of the border— is now commonplace. Recent trends in nearshoring following the COVID-19 pandemic have strengthened this integration.
In 2018, Andrés Manuel López Obrador (AMLO) won Mexico’s presidential election with the largest margin in decades.Following the June 2021 midterm elections, his National Regeneration Movement party (Movimiento de Regeneración Nacionalor MORENA) and its coalition partners dropped from 67 percent to 55 percent of seats in the lower house (theChamber of Deputies).MORENA’s coalition maintains control of the federal budget as the Chamber of Deputies alone approves the yearly expenditure budget with a simple majority.However, MORENA must now negotiate with the opposition to pass constitutional amendments, which require the support of two-thirds of both federal legislative houses and a majority of state legislatures. MORENA and its coalition partners hold majorities in 21 of 32 state legislatures (and23 of 32 state governorships).López Obrador’s six-year term ends in 2024 and he cannot run for reelection.
In August 2017, the United States entered into negotiations with Canada and Mexico to renegotiate NAFTA, which had progressively eliminated tariffs and trade restrictions since 1994. The resulting USMCA entered into force on July 1, 2020. The Agreement modernizes and rebalances U.S. trade relations with Mexico and Canada and reduces incentives to outsource by providing strong labor and environmental protections, innovative rules of origin, and revised investment provisions. It also includes important commitments on customs inspections, automation, and the treatment of low-value goods. Additionally, the USMCA establishes the strongest and most advanced provisions on intellectual property and digital trade ever included in a trade agreement, while also bringing labor and environment obligations into the core text of the agreement and making them fully enforceable.
For more information, please visit the Office of United States Trade Representative website and the International Trade Administration’s USMCA landing page.
In addition to the G20 and the OECD, Mexico is a member of the World Trade Organization (WTO) and the Asia-Pacific Economic Cooperation (APEC) forum. Mexico has 13 free trade agreements covering 50 countries, including the 11-country Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, formerly known as the Trans-Pacific Partnership). For U.S. exporters, Mexico’s participation in these international agreements means that the Mexican market is generally open and competitive.
Political Environment
For background information on the political and economic environment of the country, please use this link to access the U.S. Department of State Mexico webpage.
