Consultant Insight: US-Mexico cross-border trade struggles, but signs of improvement emerge

The United States-Mexico-Canada Agreement (USMCA) replaced the North American Free Trade Agreement on July 1, 2020, after a six-month delay due to COVID-19. However, trade between the three countries was affected by tariffs implemented during the Trump administration and COVID-19, and has yet to fully recover. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] Of the three countries, Mexico appears to have been the hardest hit. In terms of value, trade between the U.S. and Mexico was down 12.4% in 2020, after only a 0.5% increase in 2019. Trade value by all modes declined; rail declined the most at 15.3%, followed by air, down 11.5%; and trucking, down 10.1%. Mexico's gross domestic product fell by more than 8% in 2020, and with the domestic economy slow to recover, Mexico aims to export more commodities this year to its largest trade partner, the U.S. The majority of U.S. imports from Mexico are agriculture and other bulk items. In 2020, Mexico accounted for 12.2% of U.S. agricultural exports and 22.5% of U.S. agricultural imports. In addition, 22% of U.S. imports from Mexico in 2020 were machinery and electrical products such as televisions and household appliances, according to Jungle Scout, an Amazon seller software and research firm. Chemical products such as soap and garden fertilizer made up 15% of U.S. imports from Mexico. Just over 10% of U.S. imports from Mexico were vegetable products, including fresh flowers and roasted coffee beans. Trucking remains the primary transport mode for freight between the U.S. and Mexico, and a constant problem due to capacity requirements and congestion issues along the border between the two countries. Several logistics solutions are focusing on improving capacity for this trade lane. Most recently, Forager, a cross-border logistics tech startup, introduced its online load board, which offers carriers the ability to bid on and book loads moving between the U.S., Mexico and Canada. On the infrastructure side, CFI Logistics — part of U.S. truckload carrier CFI, an operating company of Canadian-owned TFI International Inc. — opened a shared facility with CFI Mexico in Laredo, Texas, a key location on the U.S. and Mexico border. CFI has twelve facilities in Mexico that provide in-country and cross-border logistics and freight transportation services. The Laredo office will serve as the sales, operations and administrative center for CFI Logistics services in and out of Mexico. “With our current and projected growth, and that of our customers seeking more services, it made sense to establish one convenient, central office for our principal U.S. and Mexico logistics management and operations teams to optimize communications, operations planning and customer service,” Greg Orr, president of CFI, said in a statement. As the U.S. economy continues to pick up, Mexico's economy will, too. Beginning in the second half of 2020, demand for manufacturing in Mexico has steadily improved. A Deloitte report noted that automobile production in the country decreased to only 3,000 units in April 2020 from 320,000 units in January 2020. However, by October last year, automobile production had climbed to 347,000 units . Mexico supplies 16% of all new light-vehicle sales in the U.S. and exports more than $80 billion in auto parts to most U.S. automotive firms. However, noting that the recent $1.9 trillion U.S. stimulus package will also help boost Mexico's economy and exports, Alejandro Diaz de Leon, governor of Mexico's central bank, said Mexico’s different sectors would recover at varying speeds as spending on goods accelerates but demand for services lags. Mexico’s economic recovery is therefore likely to extend over a long period of time.

Consultant Insight: US-Mexico cross-border trade struggles, but signs of improvement emerge

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