By: Dr. M. Ray Perryman
Published in syndication February 07, 2024
As the migrant crisis engulfs the border and the politics become increasingly complex and counterproductive, it is useful to remember the economic significance of our relationship with our southern neighbor. Let's briefly explore.
Trade between the United States and Mexico is crucial to both nations, and Texas has been the leading state for exports and imports between the two countries for decades. Through November, 2023 exports from Texas to Mexico totaled more than $120 billion, with over $132 billion in imports. Top exports include petroleum and coal products, computer and electronic products, chemicals, and transportation equipment. The largest import categories are transportation equipment, computer and electronic products, electrical equipment and appliances, and oil and gas.
In addition, complex supply chains are well developed, and components in numerous industries cross the border multiple times during the production process. Trade is beneficial to both countries, as comparative advantages with regard to costs, infrastructure, and workforce can be tapped to improve overall efficiencies, competitiveness, and growth. Consequently, prosperity both north and south of the border is enhanced.
We have analyzed US-Mexico trade for many years (I built the first model even before NAFTA) and have developed comprehensive systems to quantify the total economic benefits. Briefly stated, exports stimulate business activity in Texas to produce and transport the various goods. Imports generate downstream effects as they are transported and sold in retail outlets or used in additional production in Texas. There are also indirect effects throughout the supply chain and consumer impacts as wages earned across the production process are spent.
The Perryman Group estimates that trade with Mexico generates business activity across the United States of about $998.7 billion in gross domestic product annually and more than 8.1 million jobs (including multiplier effects and based on 2023 trade levels). For Texas, the total benefits include an estimated $471.4 billion in gross product and over 3.6 million jobs (again based on 2023 trade levels), with the border region comprising $28.9 billion in gross product and more than 301,000 jobs of the state totals. About 25% of all activity in the vast Texas economy is thus tied to interactions with Mexico.
With the current situation at the border and the State policy response, inefficiencies in the flow of imports and exports have arisen, causing notable economic losses. We found that the slowdowns arising during 2023 led to aggregate losses in the border region alone of an estimated $1.6 billion in output and about 16,750 jobs.
Mexico is now the top trading partner for the United States and has been perennially for Texas. By capitalizing on relative strengths, trade creates jobs and opportunities for both nations. The economic benefits are both enormous and expanding. Stay safe!