Mexico’s newfound competitiveness helps it regain a share of the U.S. import market it had lost to China

The U.S. market has long been critical to Mexico—not only to its manufacturing sector, but to its overall economic strength. When Mexico signed the North American Free Trade Agreement (NAFTA) nearly two decades ago, the greater access it provided to the U.S. market was a boom to the country’s manufacturing base. But Mexico’s fortunes changed dramatically after China joined the World Trade Organization (WTO) in 2001. WTO membership reduced many barriers to Chinese exports. China’s low-cost manufacturing base and ample production capacity enabled it to compete head-on and significantly undercut Mexico’s export share in the U.S. market, despite the trade preferences Mexico received under NAFTA.

Mexico’s rebound has been driven primarily by exports of electronics, telecommunications, and transportation equipment. Since 2005, Mexico’s share of U.S. imports of transportation and communications products increased steadily to 18 percent, accounting for 76 percent of total Mexican manufacturing exports in the first half of 2012. Manufacturing in Mexico was hit hard by China’s rise on the global stage at the beginning of the past decade; but today, as some of China’s cost advantage has eroded, Mexico’s manufacturing sector is among the best positioned to benefit from the changing global landscape.
 

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