Last week, the United States and Mexico postponed a planned tariff hike set for November 1st, signaling a key recognition: international trade is now defined by bloc competition, and within the North American bloc, Mexico is a critical strategic partner.
Currently, three major economic blocs dominate the global economy – North America, the European Union, and RCEP (the pact binding China to East and Southeast Asia). While North America is influential, it’s the smallest of the three. It exports nearly $3 trillion annually, with almost half of that revenue remaining within the region. The EU is larger but equally inward-focused, with 59% of its exports staying within EU borders. RCEP is the undisputed heavyweight, shipping over $7 trillion globally with only 37% of its trade circulating internally.
This situation highlights North America’s limited leverage. Washington’s understanding is that to effectively compete with RCEP and China, it must accept Mexico as a key strategic partner. The United States and Mexico aren’t just two separate nations in international trade; they’re members of a highly integrated block where supply chains frequently cross the border.
Consider a common household durable like a refrigerator. The manufacturing process involves numerous inputs – electrical control boards, switch protectors, insulated conductors – sourced from multiple countries. Crucially, these inputs regularly cross the U.S.-Mexico border. Data from our “Border Value” report, based on 2024 trade flows, reveals that refrigerator production requires an average of 16 border crossings. This means tariffs on products crossing the border wouldn’t impact the refrigerator just once; instead, each input would be subject to tariffs multiple times.
[Image of Value Chain for Refrigerators – highlighting input origins and trading volume]
Similarly, manufacturing an air conditioning unit demands 11 border crossings, while producing a car requires an even greater number. These aren’t opinions but hard facts illustrating the North American economy’s high level of integration. North America’s ability to compete with RCEP hinges on maintaining this cohesive “team.” Underrated ripple effects could disrupt essential supply chains, jeopardizing the competitiveness of the U.S. and Mexican economies.
The data is clear: tariffs within North America are essentially “friendly fire.” To remain competitive, the U.S. and Mexico must recognize they are operating on the same team.
César A. Hidalgo, Professor at the Toulouse School of Economics and director of the Center for Collective Learning, specializes in how knowledge and information shape economic and social systems. He is the founder of platforms like the Observatory of Economic Complexity, Data USA, Data Mexico, and Border Value. Hidalgo is also the author of *Why Information Grows* and *The Infinite Alphabet*.
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Fuente: https://www.mexicodecoded.com/p/why-washington-needs-mexico-to-compete