US trade deficit with Mexico climbs

US trade deficit with Mexico climbs

Mexico Economy & Policy Corporate & Sovereign Strategy US

The US trade deficit with Mexico rose to the highest level in nearly a decade in March as a weakened Mexican peso made goods produced south of the border cheaper for US companies.

The trade gap with Mexico was $7bn in March, the largest deficit since November 2007.

The deficit was fueled in part by a weaker peso, which fell nearly 20% against the dollar last year, pushed lower by Donald Trump’s victory in the US presidential election. The peso has strengthened almost 10% since January.

The US trade deficit with Mexico is one of the arguments used by the Trump administration in its push to renegotiate the North American Free Trade Agreement (NAFTA) with Mexico and Canada. Trump has also criticized US trade imbalances with China as he has promoted more protectionist trade policies.

The March figures also showed that US exports to Mexico hit $21bn, the highest level since October 2015, compared to $18.1bn in February.

A deeper look at the data published by the US Department of Commerce shows the evolution of the US-Mexico trade relationship since NAFTA was enacted in 1994. The last time the US ran a monthly trade surplus with Mexico was in September 1994, when US exports to its southern neighbor totaled $4.38bn.

Total US exports in 1994 reached $50.8bn. They were $230bn in 2016.