North American golden age

For over 100 years, the American private sector’s investment in Mexico has built a strong community through the American Chamber of Commerce of Mexico (AmCham). As the most significant investors in the Mexican economy, we’ve seen the economic dynamics between our two countries evolve over dramatically different global circumstances while building a profound and strategic integration that benefits Mexican and U.S. industries and workers.

Since the USMCA came into effect three and a half years ago, Mexico has become the United States’ largest trading partner, with a total goods exchange valued at $797.9 billion in 2023 and an average annual growth of 14.18% (U.S. Census Bureau). Going forward, Mexico can play an even greater role in building a more secure and resilient regional market.

There are at least four key industries with significant high potential for expanding U.S.-Mexico trade and investment: electromobility, medical devices and health, semiconductors, and the agro-industry. Within these industries lies the region’s competitive advantage and the need to solidify hemispheric security and self-sustaining independence. However, for these opportunities to be realized, four investment enablers must be addressed:

First, the energy grid. Mexico must increase its energy generation capacity, improve its distribution and transmission, and finally move toward a stable and cleaner grid.

Second, security and the rule of law. According to the latest Security Survey by AmCham/Mexico, 58% of companies invest between 2% and 10% of their annual budget in security, while 4% invest more than 10%. This is an “additional tax” that directly reduces competitiveness. Additionally, recent constitutional reforms have substantially changed the judicial power and eliminated independent regulatory agencies. These changes impose significant challenges for investors to reorganize and understand the new status quo.

Third is human capital. It is almost a given that whenever you speak to company leaders, they will share their struggle to find talent. According to the Mexican Institute for Competitiveness (IMCO), 75% of companies in Mexico report problems finding skilled workers. This challenge is most pronounced in medium (87%) and large (86%) companies. The most affected sectors include manufacturing (85%), wholesale trade (82%), energy (82%), and agricultural activities (82%).

Fourth is infrastructure: Mexico has underinvested in maintaining highways, railways, airports, ports, and border infrastructure. Investment in infrastructure should grow in a reasonable proportion to our trade, but this has not been the case in the last four decades.

Additionally, there is the “dragon in the room”: China. While U.S. concerns about Chinese investment in Mexico appear disproportionately loud, given the limited Chinese investment so far, it is an issue of growing political significance. To better understand the scope of the problem, it is helpful to dissect it into three parts:

One is Mexican imports from China of finished goods (22% of total Mexican imports from China) destined for the Mexican market. Unfair competition challenges key industries in Mexico, such as the auto sector and textiles. Additionally, Mexico has seen an increase in the import of small packages from China, where it is said that fentanyl precursors are being introduced to the country. The Mexican government should intervene to ensure a fair and level playing field. Potentially, a regional solution is to align tariffs with the U.S. and strengthen Mexico’s foreign investment screening regime.

Another problem is the imports of intermediate goods (16% of Mexican imports from China, predominantly electronics, automotive components, chemicals, and textiles) used in supply chains that include the production of goods destined for the United States. Mexico must reduce its reliance on Chinese sourcing, increase regional suppliers, and strengthen North American content, especially in specific industries that directly impact regional security. AmCham member companies are already working on this with the Mexican government.

Third is the import of capital goods (65% of total imports from China, such as machine tools, telecommunications equipment, and heavy machinery). Mexico must ensure it does not become a productive platform for exporting Chinese goods to the U.S. While specialized Chinese tools and machinery are sometimes used, we must keep regional content as the base of our traded goods.

Mexico and the U.S. have built sophisticated and globally competitive manufacturing operations in many strategic industries, such as automotive, electronics, and manufacturing. Today, around 40% of Mexican manufacturing includes inputs from the U.S., further supporting U.S. manufacturing and jobs. Moreover, many small and medium-sized enterprises (SMEs) also participate in these supply chains—around 49,000 U.S. SMEs exported over $110 billion to Mexico in 2022.

The USMCA review process could support the need to accelerate the improvement of the abovementioned investment enablers while correcting recent violations of the agreement and reducing the uncertainty created by repeated tariff threats. Co-production within North America will be critical as the U.S. evolves to ensure stable economic growth and rebuild America’s competitive industrial base. “America first” cannot be achieved by “America alone.” It is clear who to move forward with and why.