In the wake of Trump’s prices, Mexico’s economy needs a rethink: the point of view of our CEO
Trump prices and the acceleration of robotics and AI trends should be alarm clock for Mexico.
Part 1: How did we get here?
Part 2: Why is a rethink of the Mexican economy necessary?
Part 3: What could a rensation of the Mexican economy look like?
The purpose of this three -part series is to reflect on the emerging trends in commercial protectionism (prices), AI and robotics, consider the potential impacts on Mexico and promote a discussion on possible solutions. Please share your reflections in the comments section and have an inspiring and engaging discussion and debate.
Part 1: How did we get here?
Until recently, the world has worked under the premise that increased international trade and globalization “would increase all boats” and increase the standard of living for all those who participated.
Since the end of the Second World War, it has been the dominant thought of the way of developing the global economy and of provoking better integration. The model had to attract more business partners, sell more, develop the market, increase living standards for all and help ensure peace by the interconnection created by trade.
One by one, other countries were brought into the mixture: the countries of Western Europe, then Eastern Europe, Japan, Korea, Taiwan, the countries of Southeast Asia, China and of course Mexico. Mexico was a little late to the party, being a relatively closed economy until the North American Free Trade Agreement (ALENA) was signed with the United States and Canada in 1992. This agreement inaugurated a wave of trade agreements without a price signed between Mexico which now includes a total of 13 agreements covering 50 countries.
The role of Mexico in the world of free trade has been natural and logical-its cost of labor and geographic proximity with the United States has made it a perfect co-production partner for the manufacture of products. When the Alena was signed for the first time, many in the United States feared that manufacturing jobs will move to Mexico to the detriment of American workers (the infamous “giant sonnaire” invented by Ross Perot).
Indeed, many new manufacturing jobs have been created in Mexico, but it is the entry of China to the World Trade Organization (WTO) which has finally had the greatest impact on American workers and communities. Millions of jobs and countless factories have disappeared because the production of many products has been transferred to China.
Mexican manufacturing boom
At the start of my career, the first company for which I worked was part of this trend. Originally with the manufacturing located only in Wisconsin, in the early 1990s, the company bought a factory in the center of Mexico which expects to send manufacturing work there. Although some works have finally been moved there, much more was sent to China. This despite the fact that many of the end customers were in fact in Mexico. It was cheaper to produce in China and ship to Mexico than to produce locally in Mexico.
Mexican manufacturing over time has become more and more competitive in certain market segments, and up to the cocovid-19 pandemic, a “new normal” settles with China, Mexico and the United States focusing on the products they could produce the most competitive.
Of course, as we all know, the pandemic has changed everything.
The supply chains have broken down and companies around the world began to question their manufacturing footprints. Words like Nethoring and Friendshuring have joined our vernacular language, and Mexico seemed extremely well placed as a major beneficiary of new manufacturing and production trends in the world.
Things have changed quickly.
In 2023, Mexico, for the first time in more than 20 years, became the main supplier of goods in the United States. Mexico clearly took manufacturing market shares in China and businesses around the world increased production and reinvested profits in their Mexican operations. In 2024, the country further increased its share of exports to the United States, Mexico products representing more than 16% and China below 14%.
At the end of 2024 and Mexico closed the year with a record amount of foreign direct investment (IDE)Most people felt very well in the country’s position in the future.
Admittedly, the “new” component of the IED was extremely weak, but most people faced this until the uncertainty of the year since there were presidential elections in Mexico and the United States. The newly elected president Sheinbaum seemed to be much more “adapted to companies” than her predecessor, The inflation rate Descended, The peso stabilized And the global and Mexican economies seemed on foot.
But things have changed quickly.
Trump’s electoral victory caused a sudden wave of uncertainty and attention to Mexico. Most initial requests from the United States were that Mexico controls migration, reprimands it on the cartels, stops the fentanyl flow and accepts deportees. All the important problems, but none that initially seemed to be a risk for economic momentum.
Few people expected Trump to really try to undo the free trade agreement he proudly signed with Canada and Mexico during his first mandate as president. His first threats of prices were directly linked to wanting to see more progress in Mexico on these non -economic issues. And for many people on both sides of the border, the argument seemed right: “Mexico, help us clean up the problems that cause problems in the United States, and we will keep our free trade agreement intact.”
That being said, in recent weeks, the story of the United States on prices has changed.
Trump’s pricing speech takes a tour
Despite some rapid and tangible initial progress of Mexico on questions that Trump initially underlined, Trump refocused the “need for prices” for economic reasons. Trump began to question the need for any manufacture of taking place outside the United States. He continued to deplore lost jobs and broken communities caused by the displacement of work abroad, and insisted that the accent had to be given to bring it these jobs to the United States
And so we are there today. The most common argument against all of this is that the United States does not have enough labor, nor the energy production capacity, to be able to bring a large amount of jobs.
A logical concern is that the transition from work to more paid American workforce and the manufacturing environment at a higher cost will lead to significant inflation. But what happens if it is too too simplistic or perhaps even an obsolete explanation? What happens if companies could and ensure that important work is behind, the workforce and energy production are found and that inflation is maintained?
Let’s even completely forget the prices for a while. Although this may look like science fiction, consider the impact that the increase in robotics could have on the workforce for manufacturing the future. Consider what rapid improvement in AI and “digital twins” could do to improve manufacturing efficiency. Consider for a moment that we could be on the verge of a new industrial revolution that we have not seen for decades.
And then consider what all this could mean for Mexico and for which a rensation of the Mexican economy could look like. Part 2 will be published tomorrow in MND.
Thank you for reading.
Travis Bembenek is the CEO of Mexico News Daily AND has been living, working or playing Mexico for almost 30 years.
