Mexico could begin to benefit if the United States and China decide to continue the trade war, because it has a strengthened industrial fabric in the field of manufacturing and numerous trade agreements.
Mexico has emerged as a manufacturing center “with free-trade agreements that offer guaranteed access to more than 50 foreign countries,” John Murphy, senior vice president for international policy at the U.S. Chamber of Commerce, told CNBC.
“Mexico has a number of key advantages in comparison to other cheaper labor options, predominantly in the Southeast Asian region, as a manufacturing and export platform,” he said in an e-mail.
Investment bank Nomura, for example, chose Mexico as a trade-war winner from outside Asia, mentioning the six new factories that opened since April 2018, in a range of sectors: electrical equipment, electronics, and automobiles and component, reported CNBC.
New trade agreement
Mexico, the United States, and Canada signed a new trade agreement called USMCA—replacing NAFTA—which raised trade in goods and services to an estimated $671 billion between Mexico and the United States in 2018.
Now Mexico has officially become the third largest U.S. trading partner in goods, exporting $46 billion in machinery last year, $43 billion in electrical machinery, $34 billion in mineral fuels, $22 billion in vehicles, and $18 billion in plastics, according to the Office of the U.S. Trade Representative.
Other South American countries like Chile or Argentina, along with smaller Asian nations like Taiwan, South Korea, and Malaysia, have also begun to benefit from the trade conflict between the superpowers, and are bringing back the factories they had in China as importers try to avoid U.S. tariffs.
The most benefited nation in Asia is Vietnam, which increased its production by 8%, reported South China Morning Post citing Nomura’s reports.
The financial analyst firm explained that companies in most cases are not “completely closing down their factories in China” but “gradually moving a certain proportion of production out of China.”