The US and Mexico have a very close trading relationship. On both sides of the border, millions of jobs depend on the business ties between the two countries.
Less than a week into his presidency, Donald Trump signed an executive order to deliver on his campaign pledge to build a wall along the border between the US and Mexico. His assertion that Mexico would pay for the wall prompted a sharp response from the Mexican President, Enrique Peña Nieto and an expletive-laden hashtag that trended on Twitter.
At the heart of President Trump’s plan is the belief that a wall will help slow the flow of undocumented immigrants from Mexico to the US. He has also emphasised the idea that free trade agreements have had a negative effect on American workers and has singled out the North American Free Trade Agreement (NAFTA) as one of the worst offenders.
The US & Mexico in Trade
Mexico is one of the US’s biggest trading partners. Both countries enjoy preferential trading status under NAFTA, an agreement between the US, Canada and Mexico that allows the free flow of goods and services between the three countries. The Agreement was negotiated by the Republican administration of George H.W. Bush but was signed by his Democratic successor Bill Clinton.
In 2016, Mexico was the US’s third largest trading partner in physical goods (14.5% of the total) behind China and Canada.
President Trump has signaled his intention to withdraw from NAFTA, if he can’t renegotiate it in a way that “gives American workers a fair deal.”
An expert on the subject says the repercussions of not having NAFTA, or of worsening relations between the two countries, are “not good”. Christopher Wilson is a scholar of US-Mexican economic relations at The Wilson Center. He told The Atlantic: “You can get rid of NAFTA, but it will come at an economic cost for both sides. American companies have invested billions and billions of dollars and they are not just going to walk away from those investments just because NAFTA is gone.”
What about jobs created by trade between the two countries?
According to the Wilson Centre, nearly five million U.S. jobs depend on trade with Mexico.
According to the US Department of Commerce, in 2014, Mexico-based affiliates of US multinational enterprises employed 1.29 million people with sales of $253.4 billion, while US-based affiliates of Mexican multinational enterprises employed 77,800 people in 2014, an increase of 3.7% from the previous year; with sales of $32.8 billion, up 7.3%.
According to the Mexican government, 63% of the wealth generated by Mexico is due to its trade with the wider world.
The primary goal of President Trump’s wall is to stem the flow of Mexican migrants to America. According to the Pew Research Centre, there were 11.1 million unauthorized immigrants in the US in 2014, of which 52%, or 5.8 million, were Mexicans. This was down from 6.4 million in 2009.
The US and Mexico share a 3,200 kilometer long border (1,989 miles). Roughly one third of the border is already demarcated by various types of barrier and it’s estimated that the new wall will cost US$15-25bn.
President Trump and Mexican President Enrique Peña Nieto were due to meet at the end of January to hammer out their new trading relationship. This meeting has been cancelled by the Mexican administration, infuriated by President Trump’s assertion that Mexico would pay for the wall. Since then, however, the two have apparently enjoyed a "very friendly" phone call.
The future of trade between the two nations looks likely to be affected by trade barriers which could rise alongside the controversial wall along the border.