American-Mexican Trade and Exchange Analysis

Largely due to geography, Mexico is the United States second largest trading partner, with the U.S.-Canadian relationship accounting for almost 12% of all U.S. international trade.

Mexican-American exchange rate and international trade data for 2002 and 2003 is located on the bottom of this article. The column MEX PESO indicates how many Mexican Pesos can be purchased with 1 U.S. Dollar. An increase in this number represents a strengthened (apperciated) U.S. Dollar, and a decrease in this number represents a weakened (depreciated) one. The column MEX DEF indicates the size of the trade balance the U.S. has with Mexico. All the numbers in that column are negative, indicating that the United States has a trade deficit with Mexico. The numbers are in millions of U.S. Dollars, so -3526.60 across from Oct-03 indicates that U.S. trade deficit with Mexico was 3.5 billion dollars for the month of October 2003.

Although the U.S. Dollar has been weak against the Canadian Dollar and the Euro, it has actually appreciated against the Mexican Peso. One American Dollar bought just over 9 Mexican Pesos at the beginning of 2002; by October 2003 it bought over 11, an increase of 22%. The trade deficit has risen from 2.2 billion to 3.5 billion U.S. Dollars during this period, an increase of 57%. The correlation between changes in the Mexican-American exchange rate and the Mexican-American trade deficit for this period was -0.52, indicating that when the Dollar rose in value (relative to the peso) that the American trade balance fell. Jumps in the U.S. Dollar relative to the Mexican Peso occured at the same time as increases in the U.S. trade deficit with Mexico, which is what we would expect.

While the Canadian-American data explained little, the Mexican-American data gives some explanation to why the U.S. trade deficit remains so large. For a more complete picture, we'll need to look at the trade relationships the United States has with Japan and China. To learn more about American-Mexican Trade you'll want to read these articles:

LINKS

• NAFTAWORKS - Mexico - U.S. Trade
• Human Rights Watch - The Unfulfilled Promise of NAFTA's Labor Side Agreement

Next Section: Japanese-American Trade and the Japanese-American Exchange Rate

LIST OF SECTIONS

• Section 1: The Trade Deficit and Exchange Rates
• Section 2: Canadian-American Trade and the Canadian-American Exchange Rate
• Section 3: Mexican-American Trade and the Mexican-American Exchange Rate
• Section 4: Japanese-American Trade and the Japanese-American Exchange Rate
• Section 5: Chinese-American Trade and the Chinese-American Exchange Rate
• Section 6: Conclusion