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Mexico Could Turn Its Back On Two Major American Exports: Here’s How

As President Donald J. Trump prepares to meet with Mexican President Enrique Peña Nieto at the G20 Summit in Hamburg this week, it seems unlikely that the already strained relationship will yield much in the way of any new trade agreements. Indeed, this will be the first meeting of the two leaders since Trump took office: Peña Nieto canceled his trip to meet with Trump in January after the latter tweeted about the wall that he would like to see built between Mexico and the United States. 

In addition, Trump’s early talk of tariffs, his statements about Mexico and immigration, and the upcoming NAFTA renegotiations – which Trump called “the worst trade deal in the history of the world – don’t make for a particularly fertile climate for deal making between the two neighbors, walls or not.

Nevertheless, Mexico has persisted. The Washington Times reports that the Peso has rebounded more than 15% since Trump took office and a China/Mexico trade deal may be imminent. Those are good signs for Mexico, but with $580 billion in trade between its northern neighbor, it’s far from a cure-all should things take an unlikely turn for the disastrous. Although 80% of Mexico’s imports go to the U.S., the United States Chamber of Commerce reports that 6 million American jobs are dependent on Mexican trade. To complicate matters, two major American exports could be sharply affected if things go south. Here’s where it could hurt the most:

1) Corn

The United States is the biggest grower of corn in the world and Mexico is its number one market for export. Post-NAFTA, corn exports to Mexico have soared from $391 million in 1995 to $2.4 billion in 2015. It’s Middle America that will be hurt the most if that changes. 99% of the corn grown in Kansas, where 48,000 jobs rely on it – goes to Mexico. Another 43,000 jobs in Iowa’s corn industry are dependent on Mexico. Mexico is already in talks with Brazil and Argentina as potential sources for corn. A trade war might make for splashy headlines, but it would very well decimate American corn farmers.

2) Soy

According to the USDA, America is also the world’s largest producer and exporter of soybeans. Mexico currently imports 92% – over 4 tons – of its soy from the United States. While the U.S. also has customers in China, the E.U., and Japan, the loss of Mexico as a trade partner could sharply affect the American farmer while benefiting his Brazilian or Argentinian counterpart. 

There’s much to lose as Trump and Peña Nieto prepare to meet, but nowhere will those potential losses be more strongly felt than in the American heartland. As Darin Newsom, a senior analyst at agricultural management firm DTN said in an interview with CNN, “If we do indeed see a trade war where Mexico starts buying from Brazil…we’re going to see it affect the corn market and ripple out to the rest of the ag economy.”

 

Julian Leuthold

Julian is the founder and CEO of GetGlobal. Follow him on Twitter at @julianleuthold

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