Despite what he called a friendly discussion with Mexico's president Friday, President Donald Trump doubled down on his attacks against the imbalance in U.S.-Mexico trade.
In a tweet Friday before his hourlong telephone conversation with Mexico's President Enrique Pena Nieto, Trump said: “Mexico has taken advantage of the U.S. for long enough. Massive trade deficits & little help on the very weak border, must change, NOW!”
But it turns out trade with Mexico may not be as lopsided as Trump would have Americans believe. Bilateral trade in goods and services between the two countries was indeed massive, estimated at $583 billion in 2015. Of that, the office of the United States Trade Representative (USTR) reports total U.S. exports to Mexico amounted to $267 billion, while Mexican imports to the United States were $316 billion — leaving the U.S. with a $49.2 billion trade deficit.
Numbers can be tricky
On closer examination, that's not the entire story. In the category of professional services, the U.S. may actually have the upper hand. Total trade in services between the two countries was $52.4 billion in 2015, with the U.S. exporting $30.8 billion in services and taking in $21.6 billion from Mexico. That means the U.S. actually enjoyed a service trade surplus of $9.2 billion. The top service categories include travel, transportation and computer software.
Mexico is the third-largest supplier of goods bound for the U.S., but it's also the United States' second largest export market, supporting an estimated 1.1 million jobs in the U.S. Since signing NAFTA (the North Ametrican Free Trade Agreement) in 1994, U.S. exports to Mexico have risen 468 percent, accounting for nearly 16 percent of overall U.S. exports.
Economists say trade between the two countries also is complicated. One example — car parts: Over a five-year period, the United States imported about $340 billion worth of auto parts from Mexico. Of that, $136 billion worth of parts were exported back to Mexico, where they were used to manufacture cars that are then sold back to the United States.
Trump needs to be careful
That's one of the reasons why some trade analysts say it makes no sense to punish one of America's closest trading partners. William Galston at the Brookings Institution in Washington says Trump needs to be careful not to hurt American businesses when renegotiating established trade deals.
“Since NAFTA, U.S. automobile producers have created a continental supply chain, with Canada and Mexico providing parts and some assembly. That's an important part of the competitiveness of the U.S. auto industry. So if that relationship were to be disrupted, it could have serious consequences.”
Galston adds that disrupting that “conveyor belt” of trade is unlikely to bring back American jobs.
Mexican goods bound for the U.S. include agricultural products, such as vegetables, fruit and beer. Creating a border adjustment tax for Mexican goods, as Trump has proposed, could hurt Mexican producers, but it would also have a direct effect on American consumers, by raising prices of the Mexican products they buy.
