Trade Tensions Between Mexico and the U.S.: Impact on Foreign Trade and Global Logistics
María Elena Sierra Díaz, AS Consultores, Mexico
Introduction
The trade relationship between Mexico and the United States is facing uncertainty following President Donald Trump’s announcement of a 25% tariff on Mexican products. However, after negotiations with President Claudia Sheinbaum, the measure has been paused for one month to strengthen border security. This decision, part of a strategy to pressure Mexico on immigration and border control, has already caused instability in financial markets and concerns in the logistics and trade sectors.
Below, we analyze the potential impact of these measures on foreign trade, Mexican logistics, and their effects on Mexico’s trade partners beyond the U.S.
The Origin of the Conflict and the One-Month Truce
President Trump has justified the tariffs as a response to what he sees as Mexico’s lack of control over migration at the U.S. southern border. In response, President Claudia Sheinbaum agreed to a border security reinforcement plan aimed at curbing migration and drug trafficking. The announced measures include:
- Increased National Guard operations at the northern and southern borders.
- Stricter immigration controls at entry and exit points.
- Coordination with U.S. agencies to share intelligence on illegal trafficking.
Trump has warned that if no visible improvements occur within a month, he will proceed with the tariffs, potentially triggering a trade war with severe consequences for both economies.
Impact on Foreign Trade and Mexican Logistics
Mexico is the largest trading partner of the U.S., with bilateral trade exceeding $798 billion USD in 2023. The imposition of tariffs would significantly undermine the competitiveness of Mexican products in the U.S. market, with major consequences across several sectors:
- Decline in Bilateral Trade
- Mexican exports to the U.S. could drop by 10%-15% if tariffs take effect.
- U.S. imports to Mexico may decrease by 8%, affecting key inputs for manufacturing and automotive industries.
- Impact on Logistics and Transportation
- Land freight: 16,000 cargo trucks cross the Mexico-U.S. border daily, and they could face higher operational costs and longer delays.
- Rail transport: Mexico exports 1.5 million tons of goods per month via rail; a 20% reduction in this flow is expected if tariff costs are passed on to consumers.
- Ports and airports:
- Manzanillo Port, Mexico’s most important trade hub, could see a 12% drop in cargo traffic due to declining demand for imported materials.
- Cargo airports such as AIFA and Monterrey could experience a decline of up to 18% in import volumes if the U.S. chooses to restrict certain goods.
Risks to Logistics Infrastructure Investment
One of the biggest risks of the tariffs is the uncertainty they create in logistics infrastructure investment, an area where the U.S. is a key investor.
- The U.S. is the top foreign investor in Mexican logistics infrastructure, representing approximately 40% of total foreign direct investment (FDI) in the sector, with over $6.5 billion USD invested in the past five years.
- U.S. companies have financed major projects in industrial zones, logistics parks, and intermodal terminals in Nuevo León, Coahuila, and Baja California, all of which depend heavily on U.S. trade.
- The uncertainty surrounding tariffs could lead to suspended or relocated expansion projects, delaying investments in ports, distribution centers, and railway corridors.
If tariffs are imposed, there is a risk that some companies will reconsider their presence in Mexico or reduce investment plans, affecting the growth of strategic industries such as e-commerce, nearshoring, and advanced manufacturing.
Impact on Mexico’s Other Trade Partners
Given the uncertainty with the U.S., Mexico might seek to strengthen ties with other markets:
- Canada: As a USMCA partner, Canada could benefit from an increase in Mexican exports if tensions with the U.S. persist.
- European Union: With the Modernized Global Agreement, Mexico could redirect some exports, although at higher logistical costs.
- China and Asia: U.S.-China tensions could drive Mexico to expand trade with China, though dependence on the U.S. remains high.
Sheinbaum’s Strategy: Diplomatic Success but Weak Internal Security
So far, President Claudia Sheinbaum has handled the tariff threat well from a diplomatic standpoint. Securing a one-month truce instead of an immediate economic hit demonstrates strong negotiation skills and a willingness to maintain U.S. relations, which is a relief for Mexico’s business and logistics sectors.
However, this conflict highlights a deeper issue: Mexico’s weak internal security strategy. While the border security reinforcement might prevent U.S. sanctions, it remains unclear whether this will effectively reduce migration or organized crime, both of which require long-term solutions beyond containment policies.
Mexico continues to experience critical levels of violence and insecurity, particularly in states like Guanajuato, Michoacán, and Zacatecas, where organized crime remains a serious threat. Despite government efforts to increase military intelligence and the National Guard’s presence, homicide and high-impact crime rates have not decreased significantly.
Sheinbaum’s security policy appears focused on avoiding conflict with the U.S. rather than addressing the domestic challenges affecting millions of Mexicans. While diplomatic management is a positive aspect, it will not be enough unless she develops a comprehensive security strategy that truly improves the country’s situation.
Conclusion
Although tariffs have not yet been enforced, the threat has already caused market instability and disrupted logistics planning for export businesses. The one-month truce is an opportunity for Mexico and the U.S. to find a solution that avoids a trade war, but risks remain high.
If negotiations fail to prevent tariffs, Mexico will need to take decisive steps to:
- Diversify trade partnerships to reduce dependency on the U.S..
- Strengthen logistics infrastructure to adapt to potential long-term restrictions.
- Implement an effective internal security strategy to restore confidence in Mexico’s economy and attract investment.
At the same time, Sheinbaum’s administration must show that its focus is not just on U.S. relations but also on resolving Mexico’s security crisis, which continues to affect businesses and citizens alike.