Mexico overtakes Canada as No. 2 US exporter
MEXICO is overtaking Canada as the No. 2 exporter of goods to the US this year, in a sign of how economic ties have deepened between the two countries even as the relationship is being questioned by President- elect Donald Trump.
Shipments from Mexico totaled US$ 245 billion ( RM1.2 trillion) in the first 10 months of the year, according to Commerce Department figures released Tuesday, ahead of Canada’s US$ 230 billion. If the trend continues, it would be the first time ever the US bought more imports from its neighbour to the south. The two countries ended 2015 tied in exports to the US.
The trend of catching up to Canada puts China and Mexico as the top two exporters to the US just as Trump prepares to take office in January, reflecting the strong pull of lower cost jurisdictions for the US economy. Canada, which has one of the highest cost bases in the Americas, has seen its share of US imports fall to about 13 per cent from around 20 per cent two decades ago.
“Integration with Mexico has become more solid than with Canada,” said Marco Oviedo, chief Mexico economist for Barclays. “Manufacturing continues to be very competitive in terms of wages and location to other US producers and suppliers.”
The growing links between Mexico and US hinge on motor vehicles. Mexico has won new factories over the past six years from Toyota, Volkswagen’s luxury Audi unit, Kia Motors and BMW – up to US$ 25.9 billion in new auto investments since 2010, according to the Centre for Automotive Research in Ann Arbor, Michigan – fuelling car shipments totalling US$ 90 billion in the first 10 months. That’s versus US$ 54 billion from Canada.
Canada’s cost base is also a big part of the story. Canada’s labour bill has swelled with unit labour costs in US dollars, a key index of competitiveness, increasing by 64 per cent since 2002 even with Canada’s currency weakening in recent years.