Mexico: Trade balance surprises to the downside in March
April 27, 2017
March trade data showed exports increasing at a five-year high of 14.1% in annual terms in March (February: +8.0% year-on-year), which pushed the value of Mexico’s overseas sales to USD 35.9 billion. The surge reflected a 13.2% leap in non-oil exports—particularly manufacturing sales overseas—on the heels of a weak peso and robust external demand. Oil exports soared by 34.7% in March, the result of a benign base effect.
Imports registered a 15.0% year-on-year increase in March (February: +2.8% yoy). Imports totaled USD 36.1 billion, resulting in a USD 183 million trade deficit. March’s deficit contrasted both market expectations of a USD 950.0 million surplus and the USD 87 million surplus observed in the same month of last year.
As a result, the 12-month trailing trade deficit widened timidly to USD 11.9 billion in March, a notch below February’s USD 11.7 billion. Although this puts a halt to the downward trend that had seen the accumulated trade shortfall narrowing almost uninterruptedly since May 2016, the underlying strength of the non-oil sector suggests that, notwithstanding monthly ups and downs, Mexico’s trade deficit will continue to dwindle substantially this year.
Trump’s abrupt shifts on NAFTA have analysts scratching their heads. After being at the spotlight of a trade dispute with Canada and bluffing about withdrawing from NAFTA, the U.S. President told leaders of Mexico and Canada in late April that he did not intend to pull out of the agreement, but instead to bring it “up to date through renegotiation”. With Canada at the epicenter of the trade rift and the belligerent trade rhetoric from the U.S. toward Mexico subsiding, analysts increasingly expect that President Trump will only likely implement certain targeted and temporary trade restrictions, if at all.
Author: David Ampudia, Economist