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What would be the effect of closing the US-Mexico border?

What would be the effect of closing the US-Mexico border?

Analyses by the Congresses of both countries indicate that closing the US-Mexico border would be prejudicial to each nation’s economies.

The US and Mexican economies are tightly integrated

If President Donald Trump makes good on his recent threats of closing the US-Mexico border, millions of dollars will be lost on both sides of the international boundary.  This is due to the degree to which the economies of the United States and Mexico have become mutually integrated over the last several decades.  The approximately 2000-mile long border between the two countries is now the most dynamic in the world when commercial flows and movement of people are considered.  Trump has demanded that the Mexican government act more decisively on the issues of drug trafficking and migration.   In practice, what would be the effect of closing the US-Mexico border?

For starters, closing the US-Mexico border would impede binational trade.  Mexico is the United States’ third largest trading partner and the second largest destination of US exports after Canada.  In turn, the United States is the largest consumer of Mexican exports.

According to a recent report from the US Congress, the main US merchandise imports from Mexico in 2018 were:

  • Motorized vehicles (US $645.5 billion or 19% of imports from Mexico);
  • Auto parts (US $49.8 billion or 14% of imports);
  • Computer equipment (US $26.6 billion or 8% of imports);
  • Oil and gas (US $14.5 billion or 4% of imports);
  • Electrical equipment (US $11.9 billion or 3% of imports).

On the other hand, the main US exports to Mexico were:

  • Petroleum products and coal (US $28.8 billion or 11% of exports to Mexico);
  • Vehicle parts (US $20.2 billion or 8% of exports);
  • Computer equipment (US $17.5 billion or 7% of exports);
  • Semiconductors and other electronic components (US $13.1 billion or 5% of exports);
  • Basic chemical products (US $10.3 billion or 4% of exports).

Both countries would be affected

The aforementioned figures indicate that closing the US-Mexico border would not only cause severe economic problems for Mexico but also would do the same for the United States.  It is apparent that the trade relationship between the two countries has deepened since the North American Free Trade Agreement (NAFTA) was signed on January 1, 1994.  Since that time, the greatly expanded trade between the US and Mexico has resulted in the creation of vertical supply chain relationships.  This is especially true in the border region.

Most notably, the effect of closing the border between the US and Mexico would have a profound effect on the automotive industry of both countries.

The Automotive Sector Research Center has indicated that a closing of the US-Mexico border would cause a significant negative impact on the automotive industry supply chain.  This is an opinion that is shared by the US-based experts at the Center for Automotive Research, as well.  The two organizations are in agreement that a shut down of commercial flows between the US and Mexico would have a devastating effect on the US and Mexico auto industries within one week.  In addition to the negative repercussions on trade in the automotive industry that would result from closing the US-Mexico border, there would also be adverse consequences for the American labor force.  Many production facilities on the US side of the border would be negatively affected.

The effects of closing the border would be felt more by Mexico

On the Mexican-side, closing the US-Mexico cross border may have an even greater effect on that country’s automotive industry.  This is due to the relative size of the Mexican economy, as well as is related to the fact that Mexico is heavily dependent upon the United States as its largest source of export revenues.

Beyond the automotive industry, another sector that would be profoundly impacted by closing the US-Mexico border would be tourism.  In this area, a border shutdown would have an adverse economic impact of US $1.7 billion per day.   This is according to information provided by the Mexican National Chambers of Commerce, Services, and Tourism (Concanaco-Servytur).

Furthermore, another Mexican industry that would be deeply affected by a closing of the US-Mexico border is agriculture.  Stopping the export of 50 million pounds of products from the Mexican countryside would result in the daily loss of revenue on both sides of the border totaling US $1.7 billion.  This would be felt strongly on the US side of the border where, for instance,  Mexican produce fills 100 distribution warehouses located in Nogales, Arizona.  There are jobs in this industry on both sides of the border that are dependent upon moving agricultural goods back and forth between the United States and Mexico every day.  Closing the border would be detrimental to their health.

An increase in illegal immigration?

Additionally, some believe that shutting down the border would actually increase illegal border crossings.   This would be due to the economic hardship that would be felt by Mexico.

It is estimated that nearly half a million people cross the border from Mexico into the United States legally each day.  This is according to information provided by US Customs and Border Protection.  Many of those that cross into the United States on a daily basis do so to commute from their homes to their jobs in the U.S.  If these individuals can’t cross the border on a daily basis, the possibility exists that they would lose their jobs.  This set of circumstances would promote more poverty in Mexico,  which would then result in more pressure on immigration into the U.S.

 

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