For various decades now, the trade relationship between the US and Mexico has continued to grow. Given its proximity, cross-border trade has been crucial for the development of both countries. The US and Mexico share an approximate 2,000-mile border with 55 active land ports of entry. Naturally, this results in Mexico is one of the main trading partners of the US. In 2021, trade between the two totaled $661.2 billion. Trade improved drastically after the creation of NAFTA in the 1990s.
Here are some key facts about the main trade deal between the US and Mexico:
USMCA
One of the major trade deals between the US and Mexico is the USMCA. Formerly known as NAFTA, the USMCA was signed in 2018.
For this agreement, which also includes Canada, tariffs on certain goods were phased out.
The USMCA supports mutually beneficial trade. It is expected for this agreement to increase agricultural trade, lead to new investments in manufacturing and protect intellectual property rights.
An important part of the USMCA trade deal concerns the automotive industry.
In order for the vehicle to consider USMCA’s benefits, 70% of its aluminum and steel components must come from North America and seven main components must also be manufactured in North America.
The trade relationship between Mexico and the US will continue to improve. The Infrastructure Investment and Jobs Act (IIJA or the Infrastructure Bill) will invest $1.2 trillion to improve the country's infrastructure from roads and bridges to railways and transportation safety. According to a recent study, businesses could potentially lose $2.4 trillion in exports over the next 20 years due to an aging infrastructure. This bill can be good news for trade between the neighboring countries.
It’s a great moment for companies in the US to consider expanding to Mexico. Trade relationships are favorable and the various trade deals provide helpful benefits for companies in all industries. Agreements such as USMCA and IIJA provide protection for investors. It guarantees stability and even defines mechanisms to settle any disputes that may arise.
At Nepanoa, our team of experts will help you determine the right strategy for your business.
Read more: How to find the right suppliers in Mexico
