When Dennis Nixon started working at a regional bank in Laredo, Texas in 1975, there was only one trade beyond the border with Mexico. Now, nearly a billion dollars of trade and over 15,000 trucks are rolling on the line every day just a quarter mile from his office, committing the United States and Mexican economies together.
Laredo is America’s busiest port and a car, gasoline, avocado and computers and computers. “You can no longer choose it,” Mr Nixon said of US and Mexican economies. Thirty years of financial integration under a free trade agreement has created “interdependencies and relationships that you do not always understand and count until something goes wrong,” he said.
Now that something has happened. On Saturday, President Trump hit 25 percent invoices for Mexican imports, as he seems to be pushing the Mexican government to do more to stop immigrants and drugs to come across the border. Mr Trump also hit most Canadian goods with a 25 percent invoice and imposed 10 percent tax on Chinese imports.
A long -term invoice supporter and a critic of free trade agreements, Mr Trump seems to be uncomfortable to upgrade America’s closest economic relations. It focuses on strengthening borders against illegal immigration and the flow of Fentanyl, two areas that he often spoke during his campaign in 2024.
But the president has other meat with Mexico, including the financial competition he sets for US workers. The president and his supporters believe that the imports of cars and steel from Mexico weaken US manufacturers. And they say that the United States-Mexico-Canada agreement, the trade agreement that Mr Trump signed in 2020 to replace North American free trading agreement, or perhaps in some minds, dissolved.
Many businesses say that the links between countries are running deeper than most Americans realize and policies such as invoices seeking to disconnect them will be painful. Of all the most important economic partners in the world, the United States and Mexico are one of the most complete – associated with businesses, trade, tourism, family ties, remittances and culture. It is a proximity that sometimes creates dissatisfaction and efforts to distance the relationship, but also many benefits.
“Our countries have a symbiotic relationship,” said Juan Carlos Rodríguez, Managing Director of Tijuana for Cushman & Wakefield, one of the world’s largest real estate companies.
“Our economies are so interrelated that it will take decades for decomposition,” said Rodríguez. “Such a scenario would have a devastating impact on Mexico.”
Mexico’s huge dependence on trade with the United States dates back to at least in the 1960s, when manufacturers began opening factories just beyond the borders as a response to the cost of labor in the United States and Japan.
Trade was received when Nafta came into force in 1994. For many Americans, the commercial pact is now synonymous with factory cities. However, economists estimate that many parts of the United States have benefited as the agreement increased trade and economic activity.
Other parts of the United States were seriously injured as manufacturers moved to Mexico in search of cheaper work. As the factory cities were cut, this ended up supplying a commercial reaction, helping to pave the way for candidates against trade such as Mr Trump to win office.
In an interview, Peter Navarro, a senior adviser to the president for commerce and construction, is called NAFTA as a “disaster” and bad for both Mexico and the United States.
“The fact that China was so worse that people tend to forget how bad Nafta was,” he said.
In his first term, Mr Trump threatened the invoices in Mexico on border issues, but instead settled for an agreement. He also repeatedly threatened to retire from NAFTA, but decided to renegotiate it. His advisers added provisions to the pact they believed to enhance the construction of steel and the automotive industry, but some now say they have been reduced.
Since Mr Trump was last in the White House, Mexico’s importance for the American economy has increased. The Covid-19 pandemic disrupts global supply chains and launched a “Nearshoring” explosion.
The companies had already tried to move from China to avoid the invoices that Mr Trump imposed there, as well as the increasing costs and political risk. Manufacturers rushed to open plants in Mexico, occupying the country’s low -cost industrial base and close to the United States.
These changes have helped make Mexico the United States’s leading trading partner in goods in 2023. As the trade between countries has expanded, it also has the bilateral commercial deficit with Mexico, a measurement that is particularly concentrated by Mr Trump.
US consumers may depend on foreign products as always. However, economists argue that imports from Mexico can have quite different impact on the US economy from imports from China.
This is due to the fact that there are many comprehensive supply chains running forward and back to the North America border. Goods such as cars, electronics and bluejeans are launched between the United States, Mexico and Canada, as they are converted from raw materials into places and then finished products.
According to S&P Global economists, imports coming to the United States from Canada and Mexico, more than 18 % of their value was created in the United States before being sent to these countries. This is much more than the percentage for other countries and a sign of how close the economies are integrated.
The proximity creates other benefits: Dallas’ Federal Reserve Bank survey found that a 10 % increase in factory production in Mexico’s Ciudad Juárez leads to a 2.8 increase in overall El Paso of Texas, focused on areas such as transport, Retail trade and real estate.
“There is this perception that the border is all about walls and illegal intersections,” said Diego Solonsno, founder of Desteia, who helps companies make the supply chain decisions. “This line in the sand is actually the most powerful economic corridor on Earth.”
About $ 800 billion of value of goods were transported beyond the border last year, Mr Solórzano said, an amount that would place the US-Mexico border at a spectacular distance from the world’s 20 largest economies.
The two economies are based on their energy needs. Mexico, which depends on the United States for about 70 % of natural gas consumption, is more vulnerable to any disorders.
But the United States also introduces about 700,000 barrels of crude oil a day from Mexico. Imposing import taxes on such loads could cause fuel prices, especially diesel, energy analysts warn.
Food production is also closely integrated. Mexico supplies about half of the fresh fruits and vegetables of America and this percentage increases in the winter months. Mexico also appeared last year as the top market for US agricultural exports totaling $ 30 billion.
Bob Hemesath, a fifth -generation farmer in northeast Iowa, said Mexico was the largest buyer of American corn and also a large pig buyer, both of whom produces.
The invoices would “set an additional cost to a product that does not need to be there and will lead these countries to arrive somewhere else,” Mr Hemesath said. He spoke by phone from his farm on an unusually hot day, where he had just finished washing the pig.
“He puts me as a farmer in an economic disadvantage,” he said. “Although I understand that I want to use invoices as a negotiating tool. What do you do?”
Some Trump officials believe that corn exports were not entirely benign. Mr Navarro said NAFTA had begun the illegal problem of America’s immigration, because when the United States began exporting corn to Mexico after the commercial pact, which put Mexican farm workers out of jobs, sending some of them to the United States. States.
“That’s where the illegal problem of immigration began,” he said.
Trade irritatingly
Mr Trump and his supporters have other criticism of the United States-Mexico relationship. Some argue that Mexico has violated the terms of an agreement it has submitted to limit steel exports to the United States. They say that Mexican steel missions to the United States have exceeded the levels set by this deal, which was signed alongside USMCA
(The Mexican steel industry has its own complaints. On Tuesday, Canacero, a Mexican steel organization, claimed in a statement that it had seen a significant increase in exports of finished steel products from the United States that did not comply with the agreement.)
There are also increasing concerns about Mexico trade with China, especially in the car. Chinese car exports to Mexico have increased and some Chinese car companies have searched for Mexican factory areas.
This has fueled the concerns that Chinese companies will use Mexico as a jump from the export point to the US market in much lower invoices than if they were shipping goods from China.
Brad Setser, an economist on the Council on Foreign Relations, said the role of Mexico as a pipeline for Chinese goods in the United States had been overestimated, but that “there is absolutely an issue in the car.” One in three cars sold in Mexico last year came from China, he said. This means that Chinese exports are now meeting the Mexican demand for cars, instead of exports from the United States, a blow to the US car industry.
Other business owners argue that the United States and Mexico will have to work together to limit imports from China – but they say it does not require high invoices for Mexican products.
Greg Owens, Managing Director of Sherrill Manufacturing, a Flatware manufacturer in Sherrill, New York, said he would like to see invoices structured in a way that suspends China from the use of Mexico as a back door in the United States. But it opposes the placement of invoices in Mexico, saying that China is a much greater threat.
“China is packing a flatware factory in Guangzhou, creating a shop in Mexico only to bypass invoices – to be treated,” he said. “But you can’t destroy your commercial relationship with Mexico.”
