Mexico Trades More With Texas Than With Asia

It may seem unbelievable, but Mexico's leading trading partner is not the US per se, but Texas. In fact, in 2022, Mexico traded more with Texas ($286B) than it did with all of Asia ($262B) and six times as much as it did with all of Latin America ($48B).

It's no longer news to most that nearshoring has taken Mexico by storm following COVID-19. International consumer goods companies and vehicle manufacturers are moving production to the country's northern states. Big news came from the state of Nuevo Leon as Tesla announced a new Gigafactory in its capital city of Monterrey. However, most may not know that even Chinese companies are now choosing to manufacture in Mexico instead of China!

As of 2021, China's GDP per capita was 25% larger than Mexico's ($12.5K vs. $10K). According to Take-Profit.org, China's official minimum wage ($377/Month) is now larger than Mexico's ($234/Month). The assumption that Chinese labor is cheap by definition has changed in recent years. Also, the disruptions to the global supply chain from the pandemic and the Suez Canal blockage have raised concerns about the risks associated with manufacturing predominantly in Asia to provide for a US consumer market. In addition, the imposition of tariffs on about 66% ($300B) of Chinese goods imported to the US that the Trump administration set are still in effect. Meanwhile, the USMCA trade agreement guarantees little to no tariffs between Mexican and US entities.

Peter Goodman, a global economics correspondent for the New York Times, explained in The Daily podcast that more goods crossed into the US via the land port of Laredo, Texas in October 2022 than either the Los Angeles or Long Beach ports.

However, the Houfusan Industrial Park in Nuevo Leon is the big whammy of nearshoring phenomena. Twenty Chinese companies and their Mexican counterparts have invested hundreds of millions of dollars each to manufacture close to Monterrey. Appliance maker Hisense and furniture manufacturer Man Wah Holdings are reportedly investing $260M and $300M respectively into the park to develop their "technically" Mexican entities and qualify for the USMCA's zero tariffs.

The nearshoring craze in Mexico seems to be here to stay. So long as the US remains a large consumer market, the world will adapt to sell to it. Meanwhile, the decay in international relations and the fear of further supply chain complications have turned the dial back to when trading overseas was risky and unattractive. The "Made in China" days may be behind us, and, as Nuevo Leon's governor, Samuel Garcia, recently stated regarding the new line of Tesla vehicles built in his state, these will hit the market branded as "Made in Nuevo Leon."