Mexico’s economy finds some benefits from US-China trade tensions

Global Business

The trade war between the U.S. and China has shifted global trading relationships, with Mexico benefiting the most. But it comes with a price. CGTN’s Alasdair Baverstock reports.

When Mexico agreed to curb the flow of migrants from Central America, it did more than avert more U.S. tariffs. It preserved its new status as Washington’s top trading partner. In the first five months of this year, Mexico took the number one spot away from China. This new economic reality left Washington’s southern neighbor few options-at least in the short-term.

Mexico’s economy is sensitive to events in the US. The peso at times takes noticeable dives in reaction to tweets from President Donald Trump, and although the U.S. President backed down from imposing a blanket tariff on all Mexican goods, the threat was enough to compel Mexico City to deploy over 20,000 troops to curtail Central American migration.

Economist Luis de la Calle at COMEXI said Mexico could emerge a big winner from the China-U.S. trade war. “I think these trade frictions between China and the U.S. might, in the end, help Mexico and China see each other differently,” de la Calle said

From January to May, the volume of trade between the U.S. and Mexico climbed to nearly $258 billion from almost $249 billion in the same period last year卆n increase of $9 billion, according to the United States Census Bureau.

Now, a new COMEXI report said the China-U.S. impasse could also boost trade between China and Mexico.

“The trade frictions between China and the U.S. will result in a diversion of trade flows. So, it’s a question as to which countries might benefit from it. The truth is that Mexico will receive some of those benefits, because Mexico is a good diversification for Chinese risk,” de la Calle said.

If the conflict escalates, China could impose retaliatory tariffs on U.S. agricultural exports. Mexico could provide an alternate source of meat and produce.

According to de la Calle, “China needs significant amounts of food, so it’s a large importer, particularly in terms of meats, and Mexico is a good provider of those. We have the ability also to import grains from the U.S., and transform them into animal protein, and then send them to China. So, it’s a North American export, with Mexico functioning as the export platform.”

But that’s a best-case scenario for Mexico. Market analyst, Juan Carlos Minero from Black Wallstreet Capital, says the potential gains may never materialize if Beijing and Washington settle their differences.

“If they do reach an agreement, Mexico will be out of the table. We haven’t seen a lot of the China-Mexico relationship going from Mexico to China, but we have seen a lot of companies from China coming here to Mexico, trying to fight the U.S. tariffs,” he said.

So, there’s no telling what will happen. As the world has witnessed, all it takes is just one Donald Trump tweet to disrupt global markets.