U.S.-Mexico Trade Relations

U.S.-Mexico Trade Relations

Updated June 6, 2024
U.S.-Mexico Trade Relations
The 118th Congress is engaged in a range of legislative and
June 4, 2024. Services trade data was obtained from the
oversight activities related to trade policy toward Mexico,
U.S. Bureau of Economic Analysis (BEA).
which in 2023 became the largest U.S. trade partner.
Mexico is also of interest to Congress because of its
U.S. Merchandise Exports
proximity to the United States and the extensive bilateral
Mexico ranks second, after Canada, among markets for
trade and investment relationship under the U.S.-Mexico-
U.S. merchandise exports. The value of U.S. merchandise
Canada Agreement (USMCA). The United States shares
exports to Mexico increased from $41.6 billion in 1993 (the
strong trade ties with Mexico and any disruption to the
year before NAFTA’s entry into force) to $323.1 billion in
economic relationship could adversely affect investment,
2023. Major U.S. exports to Mexico in 2023, included
employment, productivity, or North American
petroleum and coal products ($36.8 billion), motor vehicle
competitiveness. Congress may consider how to improve
parts ($24.9 billion), semiconductors and other electronic
cooperation with Mexico in areas of mutual interest,
components ($17.8 billion), basic chemicals ($12.7 billion),
including supply chain resilience, economic
and computer equipment ($11.7 billion).
competitiveness, trade facilitation, energy security, and
U.S. Merchandise Imports
endeavors such as the U.S.-Mexico High-Level Economic
Mexico ranks first among suppliers of U.S. imports,
Dialogue and the North American Leaders’ Summit.
followed by China and Canada. U.S. merchandise imports
from Mexico increased from $39.9 billion in 1993 to
Mexico’s Economy
$475.6 billion in 2023. Leading U.S. merchandise imports
Mexico is the second-largest economy in Latin America. It has
from Mexico in 2023 included motor vehicles ($85.0
a population of 128 mil ion people, making it the most
billion), motor vehicle parts ($66.3 billion), computer
populous Spanish-speaking country in the world and the third-
equipment ($28.6 billion), oil and gas ($19.8 billion), and
most populous country in the Western Hemisphere. Mexico’s
electrical equipment ($18.8 billion).
gross domestic product (GDP) was $1.8 tril ion in 2023, equal
Figure 1.
to about 6% of U.S. GDP of $28.8 tril ion. Per capita GDP in
U.S.-Mexico Merchandise Trade 2003-2023
Mexico was $13,927 in 2023, compared to $80,474 in the
Current U.S. $ in bil ions
United States. Mexico’s per capita GDP is relatively high by
global standards, within the World Bank’s upper-middle
income category. Mexico’s GDP growth generally fol ows U.S.
economic trends, with higher fluctuations.
Source: Economist Intelligence Unit.
U.S.-Mexico Trade
In 2023, Mexico ranked first among all U.S. trading
partners, with $798.9 billion in total trade in goods (exports
plus imports) between the two countries. In comparison,
U.S. goods trade with Canada totaled $773.9 billion, while
trade with China totaled $575.0 billion. The United States is
by far Mexico’s most important trading partner, accounting

for 60% ($726.7 billion) of Mexico’s total merchandise
Source: U.S. International Trade Commission’s DataWeb.
trade with the world. It is followed by China ($123.3
billion), and Canada ($30.8 billion). Mexico relies heavily
Services Trade
on the United States as an export market, with 80% of its
The United States had a deficit in services trade with
exports destined for the United States.
Mexico of $630 million in 2022 (latest available data),
Merchandise trade between the United States and Mexico
compared to a surplus of $2.7 billion in 2021. U.S. services
increased exponentially since NAFTA entered into force,
exports to Mexico increased from $30.5 billion in 2021 to
with U.S. imports from Mexico increasing faster than U.S.
$37.7 billion in 2022, while imports increased from $27.8
exports. The merchandise trade balance went from a surplus
billion to $38.3 billion. Services trade largely consisted of
of $1.7 billion in 1993 (the year before NAFTA entered
travel, transportation, business, and financial services.
into force) to a deficit that reached $152.5 billion in 2023.
Merchandise trade data in this section of the report was
Bilateral Foreign Direct Investment
obtained by CRS from the U.S. International Trade
Foreign direct investment (FDI) is an integral part of the
Commission’s DataWeb and from Trade Data Monitor on
economic relationship between the United States and
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U.S.-Mexico Trade Relations
Mexico since NAFTA implementation. The liberalization
USMCA maintains state-to-state mechanism for dispute
of Mexico’s restrictions on foreign investment in the late
settlement, as well as the binational dispute settlement
1980s and early 1990s, combined with NAFTA investment
mechanism to review trade remedy disputes. It maintains
provisions, played an important role in attracting foreign
investor-state dispute settlement (ISDS) only between the
investment to Mexico. The United States holds the largest
United States and Mexico, without Canada, regarding
stock of foreign direct investment in Mexico, with a total of
government contracts in oil, natural gas, power generation,
$130.3 billion in 2022 (latest year available), according to
infrastructure, and telecommunications sectors, which was
the BEA. BEA data show that Mexican FDI in the United
very important for U.S. investors in Mexico. It also
States increased from $4.1 billion in 1997 (the earliest data
maintains U.S.-Mexico ISDS in other sectors, provided the
available) to $54.0 billion in 2022 (by ultimate beneficial
claimant exhausts national remedies first.
owner). According to Mexican government data, the United
States was the largest source by far of FDI flows to Mexico
Many economists state that USMCA is not expected to
in 2023, accounting for 37.8% ($13.6 billion) of the total. It
have a measurable effect on U.S. trade and investment with
was followed by Spain (10.5% or $3.8 billion), Canada
Mexico, jobs, wages, or overall economic growth as most
(9.6% or $3.5 billion), Japan (8.1% or $2.90 billion), and
of the bilateral trade liberalization took place under
Germany (6.7% or $2.4 billion).
NAFTA. The U.S. business community contends that
USMCA will strengthen North American supply chains,
U.S.-Mexico Supply Chains
especially after the COVID-19 pandemic. Some analysts
Many economists credit NAFTA with helping U.S.
contend that the United States and Mexico could strengthen
manufacturing industries, especially the U.S. auto industry,
North American supply chains by bringing the two
become more competitive through the development of
countries into better alignment in regulatory areas, tax
North American supply chains. A significant portion of
incentives, collaboration with the private sector, and
merchandise trade between the United States and Mexico
investment in human capital.
occurs in the context of production sharing, as
Issues for Congress
manufacturers in each country work together to create
Congress may monitor U.S.-Mexico trade policy issues and
goods. The flow of intermediate inputs produced in the
the overall bilateral economic relationship, especially as it
United States and exported to Mexico and the return flow of
relates to USMCA and U.S. economic interests. Some
finished products greatly increased the importance of the
Members view NAFTA/USMCA as vital for U.S. firms,
U.S.-Mexico border region as a production site. U.S.
workers and farmers, and beneficial to U.S. economic
manufacturing industries, including motor vehicles and
interests. Others are concerned over issues such as
electronics, all rely on the assistance of Mexican
enforcement of the agreement, particularly on worker
manufacturers. In the auto sector, for example, there are
rights, and the scaling back of provisions such as ISDS and
multilayered connections between U.S. and Mexican
auto rules of origin. Other major U.S.-Mexico trade issues
suppliers and assembly points. An automobile produced in
for Congress include
the United States, for example, can have thousands of parts
that come from different U.S. states and various Mexican
• Ongoing USMCA disputes with Mexico, specifically in
locations. The place of final assembly may have little
regard to Mexico’s energy sector, protection of worker
bearing on where its components are made. Most
rights in Mexico, and potential USMCA violations of
economists suggest that these linkages offer important trade
Mexico’s genetically engineered corn policies.
and welfare gains from free trade agreements.
• Concerns over the possibility of China using Mexico as
NAFTA and the USMCA
a platform to circumvent U.S. tariffs on goods from
NAFTA contained provisions on tariff and nontariff barrier
China and investing in Mexico’s manufacturing sector.
elimination, customs procedures, technical barriers to trade,
• Collaboration under the U.S.-Mexico High-Level
government procurement, foreign investment, services
Economic Dialogue and the North American Leaders’
trade, temporary entry for business persons, intellectual
Summit, including in semiconductor and information
property rights (IPR) protection, and dispute resolution.
technology supply chains, production of electric
vehicles, border infrastructure and modernization
On July 1, 2020, USMCA replaced NAFTA. Composed of
projects, economic development in southern Mexico and
34 chapters and 12 side letters, USMCA retains most of
NAFTA’s
Central America, information technology and security,
provisions, while making notable changes to
and workforce development.
market access provisions for motor vehicles and agriculture
products, rules on investment, government procurement,
See also, CRS Report R44981, The United States-Mexico-
IPR, and on worker rights and the environment. New
Canada Agreement (USMCA), by M. Angeles Villarreal
provisions on digital trade, state-owned enterprises, and
and CRS Report R42917, Mexico: Background and U.S.
currency misalignment are part of the new agreement.
Relations, by Clare Ribando Seelke.
USMCA provisions that most affect the U.S.-Mexico trade
M. Angeles Villarreal, Specialist in International Trade
relationship arguably include changes to the rules of origin
and Finance
for motor vehicles, the new chapter on digital trade, and
more enforceable provisions on worker rights.
IF11175

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U.S.-Mexico Trade Relations

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