Major drivers of Mexican exports to the US as bilateral trade exceeds $200 billion in Q1 2024

Mexico is gaining fame as the most important trading partner with the USwhere bilateral trade is established $200 billion in the first quarter of 2024, according to Census Bureau data.

Census data shows that in March 2024, Mexico exported nearly $120 billion to the U.S. and imported $80 billion.

Mexico has been thirteen of the US’s largest trading partners over the past fourteen monthsleaving Canada and China competing for second place.

Earlier this year, the US Department of Commerce figures released showing that Mexican exports to the US with almost 5% compared to the previous year, to more than $475 billion. At the same time, Chinese imports to the US fell 20% to $427 billion, making Mexico the largest exporter to the US for the first time in more than two decades.

Although the Mexican economy grew slightly in 2023, the notes of the Federal Reserve Bank of Dallas that many external factors have helped the country reach the top position among US importers, namely the increasing tensions between China and the US

Relations between China and the US have steadily deteriorated after the Trump administration imposed tariffs in 2018. followed by Beijing’s trade reprisals and military posture.

Additionally, The ongoing impacts of the COVID-19 pandemic continue to disrupt Chinese supply chains, prompting many manufacturers to move or nearshore their operations to Mexico. This shift became particularly attractive after the US, Canada and Mexico signed the agreement USMCA Trade Agreement in 2020, which streamlines the export of goods within North America.

Mexico’s steady economic growth – and a bit of luck – allowed Mexico to benefit from favorable conditions in 2023.

Becoming the most important trading partner of the world’s largest economy is not a position Mexico will want to give up anytime soon. However, to maintain a strong trade relationship, Mexican companies must expand their operations to compete with developed manufacturing sectors such as China’s.

Eighty-nine percent of the goods exported from Mexico to the U.S. are manufactured goods, followed by oil and agricultural products. What can manufacturers do to continue exporting at this pace? Some entrepreneurs argue that the key lies in technology investments and continued fiscal stimulus.

The Mexican government issued a decree late last year, in an effort to boost the nearshoring trend in ten export-oriented manufacturing sectors, including electronic components, agribusiness, engines and electronic equipment. The Treasury Department expects the fiscal stimulus measures to generate $18.5 billion in new investments by 2024.

Alex Sandoval, CEO of Allie, a Mexican AI startup serving manufacturers, told The Latin Times To meet the ongoing demands of nearshoring, ‘manufacturers will only be able to keep up with global standards by applying technological advances to their operations,” a practice with which Chinese companies are already quite comfortable.

“Traditionally, productivity in Latin America has been on the lower spectrum, and the only way Mexico can become equal to its foreign competitors is by providing more production against existing resources. In the current production landscape, this can only happen by adopting technological innovations.” he said.

To keep pace, small and medium-sized manufacturers may need to adopt the technology-based strategies of large Mexican multinationals. Many in the food and building materials sectors have already started using AI to improve their processes and take the lead. Grupo Bafar, a leading Mexican food manufacturer, has embraced AI over the past year, resulting in a performance improvement of over 15%.

Elias Picos, head of digitalization at Grupo Bafar, shared with The Latin Times their original goal to use AI to assess production performance, identify improvement opportunities and minimize downtime. “We intend to reach the point where we become a ‘smart factory’ by leveraging a digital culture that takes us to new levels of productivity,” he said.

The technology skills gap is another potential barrier for manufacturers. “If Mexican companies want to continue their digital transformation, they need to find the right talent to lead teams forward, and there is a huge talent gap right now,” Sandoval said. “Upskilling and reskilling workers should now be a top priority, and the country should focus on providing higher education programs to produce more talent in the field.”

According to a study by US staffing agency ManpowerGroup, Mexico’s tech talent shortage is expected to reach 79% this year, posing a critical challenge to the country’s continued commercial success.

Another factor impacting Mexico’s ability to attract more international companies is the lack of comprehensive ESG (environmental, social and governance) strategies, especially in achieving net-zero operations. Ana Paula Jiménez, Country Senior Partner at PwC Mexico, noted that only half of the companies surveyed in the region have integrated ESG into their business plans.

In the US, the National Association of Manufacturers released a 2022 report showing that 58% of manufacturers consider sustainability essential to future competitiveness – an increase of 20% from 2021.

As manufacturers strive for higher production, it is critical to balance productivity and sustainability. Active participation in the energy transition, which involves the transition from fossil fuels to renewable sources, is crucial. Mexican manufacturing has a long tradition of providing quality exports around the world. Many contemporary entrepreneurs hold this opinion If Mexico is to maintain its status as a leading trading partner, it is crucial to adopt the latest technology, upskill the production workforce and invest in sustainability throughout the production process.