Since 1994, and the very responsible policies put in place by President Ernesto Zedillo after the economic collapse that year, Mexico has floated its currency.
At the last debate last night, Mr. Trump said that Mexico was devaluing its currency to gain an advantage on the U.S.
Frankly, Mr. Trump is wrong. The peso is falling today and it is not part of any plan. The New York Timesreports on the peso:
One of those causes is the fall in oil prices, which saps market confidence in oil exporters like Mexico. The government here relies on oil revenues to finance part of the budget, and the price drop has already forced budget cuts. Last week the president of the central bank, AgustÃn Carstens, insisted that more cutbacks were needed to avoid “a much longer and more painful adjustment process.”
Still, analysts say the economy is better protected than in the past. Public debt is manageable and the central bank sits on healthy foreign reserves. Unlike many of the emerging market economies that have also watched their currencies struggle against the dollar, Mexico’s economy grew a modest 2.5 percent last year, and is expected to grow again this year.
Mexico has developed a rather huge economic relationship with the U.S. since NAFTA. It makes no sense for Mexico to play with its currency and make U.S. products more expensive. Mexico buys these goods and services, as we see from this report:
Mexico was the United States’ 2nd largest goods export market in 2013.
U.S. goods exports to Mexico in 2013 were $226.2 billion, up 4.7% ($10.2 billion) from 2012, and up 132% from 2003. It is up 444% since 1993 (Pre-NAFTA). U.S. exports to Mexico accounted for 14.3% of overall U.S. exports in 2013.
The top export categories (2-digit HS) in 2013 were: Machinery ($38.5 billion), Electrical Machinery ($36.7 billion), Mineral Fuel and Oil ($23.0 billion), Vehicles ($21.6 billion), and Plastic ($15.3 billion).
U.S. exports of agricultural products to Mexico totaled $18.1 billion in 2013, the 3rd largest U.S. Ag export market. Leading categories include: corn ($1.8 billion), soybeans ($1.5 billion), dairy products ($1.4 billion), pork and pork products ($1.2 billion), and poultry meat (excluding eggs) ($1.2 billion).
U.S. exports of private commercial services* (i.e., excluding military and government) to Mexico were $27.4 billion in 2012 (latest data available), 6.8% ($1.7 billion) more than 2011 and 57% greater than 2002. It was up 163% from 2003 (Pre-NAFTA). The other private services (business, professional and technical services and financial services), and the travel categories accounted for most of U.S. services exports to Mexico.
It’s time to call out Mr. Trump’s nonsense that actually puts U.S. jobs at risk by calling for a trade war with a major trading partner.
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