Untethering trade from the US
Mexico cannot ditch the US completely, but it should diversify its economy away from it.
Global trade often works on the “gravitational principle,” in which commerce happens mostly between neighbouring markets. It helps explain why Mexico trades more with Central America as a whole than the much larger Colombian, Peruvian, and Chilean economies put together—all of which are, in theory, boosted by a free trade agreement with Mexico called the Pacific Alliance.
The United States’ gravity is so potent in this regard that it has tidally locked Mexico to become almost totally dependent on it. Around 80% of Mexico’s exports, 55% of its imports, and 41% of its foreign direct investment depends on the US.
This is not abnormal and, theoretically, a positive outcome of thirty years of the US-Mexico-Canada Agreement (USMCA) and its predecessor, NAFTA. That was until a Donald Trump-shaped crisis threatened to plunge the Mexican economy into turmoil on a whim via 25% tariffs on all Mexican goods imported into the US.
Catastrophe has been averted for a month, but even if Trump backs down Mexico needs to reconsider its utter dependence on its northern neighbor.
As the US becomes increasingly erratic and authoritarian, it can no longer be considered a reliable partner. It therefore becomes a matter of national security and economic stability for Mexico to diversify its trade relationships. It needn’t break off from the US, nor force companies to stop trading with it. Instead, with intense and concerted help from the government, new companies and new relationships with all the other countries in the world should be fomented and boosted.
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