Amid criticism from US President Donald Trump over his country's trade imbalances, the balance in favor of Mexico rose to US$171.809 billion last year.
Mexico's trade surplus with the United States broke a record in 2024, growing at an interannual rate of 12.7% and reaching US$ 171,809 million.
This trend is becoming more relevant because US President Donald Trump intends to create internal public policies or negotiations with third countries to reduce the negative balance of the United States in its trade balance of products.
Considering its trade with the entire world, imports of products to the United States amounted to US$ 3.3 trillion in 2024, and exports from this same country totaled almost US$ 2.1 trillion, resulting in a deficit of around US$ 1.2 million, a negative balance that grew 14% at an annual rate.
Following his inauguration, Trump signed the America First trade policy memorandum, which identifies a series of actions to be completed by April 1, 2025, including investigating the causes of “United States trade deficits in goods, as well as the resulting economic and national security implications and risks of such deficits,” and recommending “response measures.”
U.S. trade with Mexico and Canada accounts for nearly 30 percent of the country's imports, making the relationship a target for President Trump's nationalist agenda.
Trump has criticized countries with which the United States has a large trade deficit, arguing that the country is at a disadvantage that needs to be corrected through tariffs. However, according to JP Morgan, the elasticity of substitution of many major US imports from Mexico and Canada is below average, meaning that potential tariffs would likely lead to higher domestic prices.
In 2024, the United States recorded trade deficits of US$63.336 billion with Canada and US$295.402 billion with China. In addition, it had negative balances with Vietnam, India, Taiwan, South Korea and the European Union at record levels.
From JP Morgan's perspective, while trade deficits are central to Trump's criticism of Canada and Mexico, there are other issues in each bilateral relationship that will be key to monitor in case the North American Free Trade Agreement (USMCA) is used, as it has already been, as leverage to address non-trade concerns.
Trump has criticized Canada's reliance on U.S. military support, arguing for cost-sharing. In his previous administration, he also criticized Canada's dairy supply management system, arguing it imposed unfairly high tariffs on U.S. dairy products and created barriers for American farmers.
In the relationship between the United States and Mexico, the main issues are trade, immigration, and security. In 2019, President Trump threatened to increase tariffs on imports of Mexican products if Mexico did not control immigration from Central and South America through the country to the United States, which led in part to the creation of the USMCA in 2020.
Similarly, the deal is likely to be used once again as leverage to negotiate stricter immigration policies with Mexico and a greater focus on border security. For JP Morgan, what is different this time is the declaration of a “national emergency” on the US-Mexico border.
ANATOMY OF DEFICIT
In general, there is a consensus among economists that tariffs are a tool of little use in reversing a country's trade deficit, since they are caused by structural macroeconomic phenomena.
A trade deficit reflects an excess of domestic demand that cannot be satisfied by goods and services produced locally.
This excess can be caused by a fiscal deficit (a situation in which the government spends or consumes more than it collects) and/or by an imbalance between productive investment and domestic savings, where there is an insufficiency of the latter.
In the presence of macroeconomic imbalances such as these, the imposition of tariffs on one or more particular economies will only redistribute the balance of the trade deficit among other countries.
In the case of the United States, after the start of its trade war with China in 2018, its trade deficit with the Asian country was reduced, but simultaneously its deficit with Mexico grew and, more rapidly, with other Asian countries such as South Korea, Vietnam and Taiwan.
With these three countries alone, Washington's trade imbalance totaled US$263 billion, with Vietnam accounting for almost half of that figure.
