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Mexico Looks Away from the United States for New Trade Growth

Since the election of Donald Trump, the administration of President Enrique Peña Nieto has shown an interest in boosting Mexico’s trade with countries other than the United States.

Last month, the Mexican Secretary of Foreign Relations, Luis Videgaray, met with his counterpart, Sergey Lavrov, in Moscow to discuss regional and multilateral issues.

“Both Foreign Ministers agreed to boost bilateral trade and investment in coordination with business sectors,” according to the Secretary of Foreign Relations’ blog. “In addition, they agreed to take advantage of the institutionalized dialogue mechanisms existing between Mexico and Russia to maintain constant communication in order to broaden and deepen the common agenda.”

Trade with Russia dwarfed by US and China

Trade between Mexico and Russia has grown quickly in the last decade. In 2016, Mexico exported $179 million to and imported $1.301 billion from Russia in goods. The rise and fall of exports in the last decade roughly correspond to the rise and fall of the Russian economy.

mexico russia

While trade with Russia has grown in recent years, it still pales in comparison to Mexico’s largest trading partners: China and the United States. Mexico maintains its largest trade surplus with the United States and its largest trade deficit with China.

mexic us china russia

In 2016 the United States was Mexico’s largest trade partner in terms of both imports ($179.9 billion) and exports ($302.9 billion). Whereas Russia was Mexico’s 14th and 49th largest trading partner in terms of imports ($1.3 billion) and exports  ($0.2 billion), respectively.

Growing export destination for auto industry

Although overall trade was low, Russia has been a growing market for the Mexican auto parts industry. Mexico has been a fast-growing market for vehicle manufacturing investment. Even as President Donald Trump threatens to terminate the North American Free Trade Agreement to bring manufacturing jobs back to the United States, international car companies have continued to invest in vehicle and auto parts manufacturing to Mexico.

In 2016, gearboxes and drive axles for vehicles accounted for 27 percent of all exports from Mexico to Russia, or $49 million. For comparison, in 2012 these two types of goods were valued at less than $5 million.

mEXICAN EXPORTS russia

The growth in exports of gearboxes and drive axles comes as overall exports have been falling. In 2013, the Russian economy fell back into recession. While its economy contracted slightly in 2016, the International Monetary Fund predicted in its World Economic Outlook that the Russian economy will expand by 1.8 percent in 2017 and 1.6 percent in 2018.

For a number of reasons, including economic size and proximity, there is no country in the world that can replace the United States as a trade partner with Mexico. However, Mexico’s geographic position and liberal attitude towards trade mean that it has the potential to diversify its trade portfolio away from North America.

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