The U.S.-Mexico Trade Relationship under AMLO: Challenges and Opportunities

Abstract

Andres Manuel Lopez Obrador (AMLO) became Mexico’s president on December 1, 2018. Mexico today, with AMLO as president, faces enormous challenges including helping millions of Mexican citizens out of poverty, dealing with violence (drug-related, oil and mineral theft, kidnappings, extortion, homicide, and others), and addressing the corruption that is endemic in much of the nation. Also vitally important is maintaining a strong trade relationship with the United States under President Donald Trump, on which nearly 80% of Mexico’s exports depend, and addressing a petroleum sector where oil production (and revenue) have been declining each year. However, new opportunities also exist now that Mexico, Canada, and the United States have signed a revised NAFTA, the United State-Mexico-Canada Agreement (USMCA).

After presenting a brief overview of the USMCA, this article focuses on the aspects of USMCA most likely to affect Mexico including four key sectors modified under the agreement: automotive, energy, agriculture, and labor. It also addresses several important uncertainties that will affect the U.S.-Mexico trade relationship, including the possible rejection of the USMCA by the U.S. Congress; AMLO’s domestic policies, which may affect investor confidence in Mexico; and the interrelationship of Mr. Trump’s trade policies and unrelated issues such as immigration and the “wall,” which could have spillover effects. Finally the article concludes with a short list of policy recommendations.

Keywords: Andres Manuel Lopez Obrador, USMCA, rule of origin, tariffs, protection for investors