When Dennis Nixon started working at a regional bank in Laredo, Texas, in 1975, there was only a ray of trade across the border with Mexico. Now almost a billion dollar in trade and more than 15,000 trucks roll over the line every day just a quarter of miles from his office, which means that the economies of the United States and Mexico bind together.
Laredo is the busiest port in America and a leadership for car parts, gasoline, avocados and computers. “You can't take it apart anymore,” Mr Nixon said about the American and Mexican economies. Thirty years of economic integration under a free trade agreement has created “mutual dependencies and relationships that you do not always understand and measure, until something goes wrong,” he said.
Now that something looms up: 25 percent rates for Mexican products, which President Trump intends to impose on Saturday, because he wants to put pressure on the Mexican government to do more to curb illegal immigration. Mr Trump is also expected to touch Canada with 25 percent levies and impose a 10 percent tax on Chinese import.
A prolonged proponent of rates and a critic of free trade agreements, Mr. Trump does not seem afraid to increase the nearest economic relationships of America. He focuses on strengthening the border against illegal immigration and the flow of Fentanyl, two areas that he often spoke about during his 2024 campaign.
But the president has other beef with Mexico, including the economic competition it is for American employees. The president and his supporters believe that the import of cars and steel from Mexico weaken the American manufacturers. And they say that the United States-Mexico-Canada agreement, the trade agreement that Mr Trump signed in 2020 to replace the North American free trade agreement, may have to be updated or perhaps deleted in some spirits.
Many companies say that ties between the countries are deeper than most Americans realize, and policy such as rates they want to break would be painful. Of all the most important economic partners in the world, the United States and Mexico are among the most integrated – connected by cases, trade, tourism, family ties, transfers and culture. It is a proximity that sometimes generates dissatisfaction and efforts to record the relationship, but also provides many benefits.
“Our countries have a symbiotic relationship,” said Juan Carlos Rodríguez, director of Tijuana for Cushman & Wakefield, one of the world's largest commercial real estate companies.
“Our economies are so intertwined that it would take decades to disconnect,” said Mr. Rodríguez. “Such a scenario would have a catastrophic impact on Mexico.”
Mexico's immense dependence on trade with the United States dates at least to the 1960s, when manufacturers started to open factories across the border in response to climbing labor costs in the United States and Japan.
Trade was picked up when NAFTA came into force in 1994. For many Americans, that trading pact is now synonymous with offshoring and decimated factory cities. But economists calculate that many parts of the United States benefited as the agreement increased trade and economic activity.
Other parts of the United States, such as parts of the industrial northwest, were seriously injured when manufacturers moved to Mexico in search of cheaper work. While factory cities, which eventually fed a trading rotation, releasing the road for anti-trading candidates such as Mr. Trump to win the office.
In an interview, Peter Navarro, the senior counselor of the President for Trade and Production, mentioned a “catastrophe” and bad for both Mexico and the United States.
“The fact is that China was so much worse that people tend to forget how bad Nafta was,” he said.
In his first term, Mr Trump threatened the rates for Mexico for border issues, but pleased instead for a deal. He also threatened to withdraw from Nafta repeatedly, but decided to negotiate again instead. His advisors added facilities to the pact that they believed would strengthen American steel and automatic production, but some now say they are inadequate.
Because Mr. Trump was in the White House for the last time, the importance of Mexico for the American economy has grown. The COVID-19 Pandemie disturbed global supply chains and started a “nearshoring” tree.
Companies already wanted to move from China to avoid rates that Mr Trump imposed there, as well as rising costs and political risk. Manufacturers hurried to open plants in Mexico and grabbed the cheap industrial basis of the country and the proximity of the United States.
Those changes have contributed to making the best trading partner of the United States in goods in 2023. The more trade between countries has been expanded, the bilateral trade deficit with Mexico, a metric on which Mr Trump is primarily focused.
American consumers can be just as dependent on foreign products as always. But economists claim that the import from Mexico can have very different implications for the American economy than import from China.
That is because there are many integrated supply chains that run back and forth across North American borders. Goods such as cars, electronics and blue jeans are volleyed back and forth under the United States, Mexico and Canada because they are changed from raw materials to parts and then end products.
According to economists from S&P Global, from the import that comes from Canada and Mexico to the United States, more than 18 percent of their value was set up in the United States before they were sent to those countries. That is much more than the share for other countries, and a sign of how closely the economies are integrated.
Property creates other benefits: Research by the Federal Reserve Bank of Dallas has shown that an increase in factory production by 10 percent in Ciudad Juárez, Mexico, leads to an increase of 2.8 in the total employment in El Paso, Texas, concentrated in Areas such as transport, retail and real estate.
“There is the perception that the border is all about walls and illegal crossings,” said Diego Solórzano, the founder of Desteia, who helps companies to make the supply chain decisions. “This line in the sand is actually the most powerful economic corridor on earth.”
About $ 800 billion in goods was transported across the border last year, Mr. Solórzano, an amount that would position the border between the US and Mexico at a striking distance of the 20 largest economies in the world.
The two economies are confronted with each other for their energy needs. Mexico, which depends on the United States for an estimated 70 percent of its natural gas consumption, is more vulnerable to any disturbances.
But the United States also import around 700,000 barrels of crude oil a day from Mexico. The imposition of import taxes on such loads could yield with fuel prices, in particular diesel, warn energy analysts.
Food production is also closely integrated. Mexico supplies about half of the fresh fruit and vegetables of America, and that ratio rises in the winter months. Mexico also emerged last year as the top market for American agricultural output, a total of $ 30 billion.
Bob Hemesath, a fifth generation farmer in the northeast of Iowa, said Mexico was the largest buyer of American corn and also a large buyer of pigs, which he both produces.
Rates would “set an extra costs for a product that does not have to be there, and it will encourage those countries to look somewhere else,” said Mr Hemesath. He spoke by telephone from his farm on an unusually hot day, where he had just finished the powerwashing of a pig facility.
“It brings me as a farmer to an economic disadvantage,” he said. “Although I understand that I want to use rates as a negotiating tool, what does that do?”
Some Trump officials think that the export of corn has not been entirely benign. Mr. Navarro said that Nafta had started the illegal immigration problem of America, because when the United States was in force after the trading pact, when the trading pact began to export that Mexican farm workers were sent out, causing some of them to be sent to the United States .
“That's true that started, our illegal immigration problem,” he said.
Exchange irritating substances
Mr. Trump and his supporters have other criticism of the relationship between the United States-Mexico. Some claim that Mexico has violated the conditions of an agreement that it has concluded to limit its steel exports to the United States. They say that Mexican steel shipments to the United States have exceeded the levels established by that agreement, signed next to the 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 exporting finished steel products from the United States that do not meet the agreement).
There are also growing concerns about the trade in Mexico with China, especially in the automotive sector. The Chinese car export to Mexico has risen and some Chinese car companies have scored on Mexican factory sites.
This has been worried that Chinese companies will use Mexico as a starting point to export to the American market at much lower rates than when they send goods from China.
Brad Setser, an economist at the Council on Foreign Relations, said that the role of Mexico as a channel for Chinese goods to the United States was exaggerated, but that “there is definitely a matter in the automotive sector.” One in three cars sold in Mexico last year came from China, he said. That means that Chinese exports now meet the Mexican demand for cars, instead of export from the United States, a blow to the American car industry.
Other business owners claim that the United States and Mexico must work together to limit the input from China – but say that this does not require high rates for Mexican products.
Greg Owens, the Chief Executive of Sherrill Manufacturing, a flatware manufacturer in Sherrill, NY, said he would like to see rates in a way that prevents China from using Mexico as a back door to the United States. But he opposes the making of rates on Mexico and says that China is a much greater threat.
“China takes a flat factory in Guangzhou, and set up a store in Mexico to circumvent rates – that should be tackled,” he said. “But you can't destroy your trade relationship with Mexico.”
