For the first time in our three-decade free trade history with North American partners, Mexico surpassed Canada as the top buyer of U.S. goods. This is significant; it means that our trade relationship with our neighbor and ally is flourishing despite political tension stemming from hostile rhetoric and the imposition of tariffs that have created economic uncertainty.
Data recently released by the federal government indicate that from January to August, the U.S. exported $1.4 trillion in goods, with $225.6 billion heading to Canada and $226.4 billion to Mexico. The growth in U.S exports to Mexico was an expected trend as trade deals have made our economies more interdependent.
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Mexico has already been our most important trading partner in the last couple of years, but this latest milestone also highlights the growing power of the Mexican middle class. This was one of the promises of establishing the original free trade zone under the North American Free Trade Agreement, which was replaced in 2020 with the United States-Mexico-Canada Trade Agreement, or USMCA.
This is also good news for Texas. Our state exported $123.5 billion in goods to Mexico in 2024, representing 27% of goods exports.
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North American economies are now intertwined, and Mexico stands out as a prime beneficiary. Thanks to a massive increase in foreign investment, Mexico's economy is less vulnerable to downturns, and this has translated into greater political stability. Challenges remain as Mexico is still susceptible to domestic political whims, drug cartel violence and corruption, but a strong economy has made our southern neighbor a crucial player.
Free trade has gotten a bad rap lately. Politicians, from the left and right, have criticized trade deals as the reason for job losses in the U.S. Usually, this explanation draws an incomplete picture: With free trade, there are winners and losers, but it creates a dynamic economy where even those losers have the advantage to go back to the job market and start over. Consumers are the ultimate winners.
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Tariffs have affected Mexico's economy but not as much as expected. Analysts cite Mexico's labor costs and an increasingly skilled workforce as some of the reasons, but the USMCA also limits the type of tariffs that can be imposed.
President Donald Trump has used tariffs as a strategy to pressure U.S. trading partners, but, unlike Canada, Mexico has been able to navigate this complex political landscape with a less confrontational approach.
That said, the USMCA is up for a joint review in the middle of next year. According to Rice University's Baker Institute think tank, the U.S. may require changes to the rules of origin for cars and auto parts and place limits on Chinese investment, among other asks.
We can expect politics to influence these negotiations, but if smart voices prevail, North American economies should continue to thrive.
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