(Bloomberg) -- The people of Mexico don’t get a vote in the US presidential election on Nov. 5, but they’ve got a lot riding on the outcome.
Mexico is far more reliant than the US on the $800 billion of annual trade across their common border. So its economy could suffer a gut punch if Donald Trump gets to fulfill a campaign pledge to impose sweeping tariffs on imports from the country and send millions of migrants back over the border.
Here’s more on what a second Trump presidency, or a first Kamala Harris one, could mean for the world’s biggest trade relationship.
What’s at stake for Mexico in the US vote?
In terms of the economy, pretty much everything. Some four-fifths of Mexico’s exports go to the US, earning it more than $475 billion last year alone.
Much of that business would be under threat if Trump wins the election and gets to impose a raft of policies to stem a loss of manufacturing jobs to lower-wage economies.
In contrast, trade with Mexico represents only about one-tenth of the US total.
Millions of Mexicans living undocumented in the US could also be sent home if Trump wins the election.
What would Trump do on trade with Mexico?
He’s vowed to impose a tax of 10% or 20% on all goods entering the US, and a tariff as high as is necessary to stop companies importing cars produced in Mexico: “I’ll put 200 or 500%, I don’t care,” he said in an interview with Fox News.
Mexico’s peso currency was underperforming emerging-market peers in the run-up to the US vote. The peso sold off after Trump said “tariff” was his favorite word in the dictionary in an interview with Bloomberg News Editor-in-Chief John Micklethwait in mid-October.
What would Harris do on trade with Mexico?
The US vice president has criticized Trump’s tariff plans, calling them a “sales tax on the American people.” Yet she also appears to endorse his tariff approach “at least somewhat” as a way to boost US industry, said Wendy Cutler, a former acting deputy US Trade Representative and now vice president at the US-based Asia Society Policy Institute.
The Harris camp’s lack of policy specifics opens “a wider array of potential outcomes with regard to the US-Mexico relationship and trade,” Morgan Stanley strategists including Nikolaj Lippmann in wrote in an Oct. 29 note.
The next president will have greater scope than their predecessor to adjust that relationship as they are due in 2026 to review the United States-Mexico-Canada Agreement, or USMCA, on trade and decide whether to extend it for an additional 16 years.
Trump has said he wants to negotiate a “better deal.” Harris said she considers USMCA to be “not sufficient.” She’s said major trade deals need to include protections for workers and the climate.
Why is US-Mexico trade so big?
It’s a natural partnership, with a country full of low-cost, skilled labor on the doorstep of the world’s biggest consumer economy.
For decades, there were zero tariffs to be paid on virtually all goods sold across the US-Mexico border under the North American Free Trade Agreement spearheaded in the US by the Bill Clinton administration.
Trump attacked NAFTA when he was president, calling it “the worst trade deal ever made.” His replacement, the USMCA, required more vehicle components to be made in North America, with a portion made by workers earning an average of at least $16 per hour.
Since it was implemented in 2020, the USMCA has done little to dim Mexico’s appeal as a cheap manufacturing hub. In fact, last year it overtook China as the biggest US trading partner.
One reason is that the Covid-19 pandemic exposed the fragility of global supply chains and boosted the attractiveness of making things closer to where they are consumed. Investment into Mexico became an appealing option for companies with operations in Asia looking to “nearshore” production destined for the US.
That said, much of the investment in Mexico since 2022 has been by companies expanding existing operations, with fewer making fresh bets on the country. Mexico is grappling with major security problems, and companies there can face difficulties accessing reliable electricity and water supplies. The US elections have also contributed to the slowdown in new investments.
What does Mexico produce for the US?
Cars and car components have long been top of the list. AGP Group, which makes windshields, Chinese electronic component maker DSBJ and Italian brake maker Brembo SpA are all setting up or expanding factories in Mexico.
The global shift to electric vehicles is cementing Mexico’s role. Tesla Inc., General Motors Co., Kia Motors Corp. and BMW AG have all announced EV investments in Mexico. Some Deere & Co. farm machinery is made there, and the company is building a new plant in Mexico — a move that’s drawn scathing criticism from Trump.
Mexico is also a big player in electronic goods and home appliances, with a major manufacturing expansion under way in the center of the country. Hon Hai Precision Industry Co. — the Taiwanese company also known as Foxconn, which is a key supplier to Apple Inc. and a partner of Nvidia Corp. — has also been expanding there. And across the border from California, aerospace and plastics industries are growing too.
What are businesses doing in response to the uncertainty?
Billionaire Trump-backer and Tesla founder Elon Musk is holding off on building a planned factory in the Monterrey area because he wants to see how the US election shakes out. Chinese electric-vehicle maker BYD Co. has been scouting locations for a Mexico plant but is delaying an announcement to see the outcome of the race.
Others are pressing ahead. Foxconn recently announced it was building the world’s largest assembly plant for servers housing Nvidia’s most advanced Blackwell chips in Mexico.
What about migration?
Mexico’s manufacturing boom has failed to create enough well-paid jobs to lift millions out of poverty — so people remain one of the country’s biggest northward exports. Mexico also serves as a transit route for millions of migrants from other countries seeking better lives and opportunities in the US.
Trump has openly called for a mass deportation of all undocumented immigrants in the US — some 11 million people, 4 million of whom are Mexican — beginning with those who have committed any crimes. He’s also vowed to build an additional 200 miles of physical barriers along the 1,933-mile US-Mexico border, adding to the approximately 654 miles of barrier already there.
He hasn’t explained in detail whether he will deport migrants to their port of entry — in many cases the border with Mexico — or to their countries of origin.
Mexican authorities would struggle to absorb millions of migrants, be they returning Mexicans or those of other nationalities. A sudden influx would made it difficult to provide them with the benefits and services needed to reintegrate them into their local communities, said Ariel Ruiz Soto of the Migration Policy Institute.
Mass deportations would also threaten the flow of remittances from Mexicans working abroad that have been one driver of Mexico’s economic growth. Deutsche Bank AG strategists estimated that remittances from the US to Mexico represent more than 3% of the nation’s gross domestic product, or about $60 billion.
Harris has put a focus on tightening conditions for foreign asylum seekers, helping her to project a tougher stance on illegal migration and address one of her biggest vulnerabilities in the November election.
At the same time, she’s called for improvements to the way legal migrants are welcomed. The vice president has pledged to seek a bipartisan agreement to deal with illegal immigration through the US-Mexico border. The initiative has similarities with an earlier Border Bill backed by Biden that Trump advised his allies in Congress to kill.
--With assistance from Vinícius Andrade.
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