Mexico to begin reaping rewards from US-China trade war
Issue No. 107
Assets covered: USD/MXN
Countries covered: Mexico, US, China
Complete Intelligence CEO Tony Nash discussed in an interview Monday how Mexico is well-positioned to benefit from the US-China trade war and the emerging era of trade regionalization. Below we go into a little more detail.
Our latest forecasts show that capital investments in Mexico should post a small increase next year after falling for three years in a row. With its proximity to the US and a large and educated workforce, the country is a natural option for manufacturing investment, especially if a new North American trade deal is ratified in the US (discussed previously here).
The US-China trade war winds are currently blowing slightly favorable, but even if there is an incremental agreement, over the long-term, Mexico should still be a winner as companies reconsider China investments in light of the risks.
Mexico Gross Fixed Capital Formation forecast through January 2020
This chart was generated using CI Futures. Book a demo to see it in action.
China’s overall trade dwarfs Mexico’s (chart below), the trends are clearly in the latter’s favor. We forecast Mexico’s total foreign trade will grow 8 percent this year, compared to only about 2 percent for China (table below). The trend should continue in 2020.
Mexico/China Total Foreign Trade forecast through January 2020
This chart was generated using CI Futures. Book a demo to see it in action.
We also see a period of stability for the Mexican peso into early next year, after several years of weakening, a positive sign for investors.
USD/MXN Exchange Rate forecast through January 2020
This chart was generated using CI Futures. Book a demo to see it in action.
As global trade retrenches into regionalized trade, Mexico should see strong interest from companies selling into the US market.