Navigating U.S-China trade war: Mexico’s economic diplomacy in perspective

Abstract

China's growing involvement in trade and foreign investments across Latin America and the Caribbean has impacted regional countries relations with the United States, the traditionally dominant power. In the case of Mexico, China is expanding its presence in the Mexican economy, which could either strengthen or complicate the Mexico-U.S. relationship. The article aims to examine the impact of China's role in the Mexican economy within the framework of Mexico-U.S. ties and the U.S.-China trade war. It argues that the trade war augments Mexico's participation in the U.S. market through the U.S.-Mexico-Canada Agreement(USMCA). The empirical analysis demonstrates that Mexico has leveraged the U.S.-China trade war under the new rules established by the USMCA. The new rules of origin and labor provisions give Mexico a greater advantage in accessing the U.S. market and enhance the country's appeal to foreign companies for nearshoring, despite the asymmetrical nature of Mexico-U.S. relations. Meanwhile, rather than hindering Mexico-China trade, the prohibition stipulated in the USMCA against signing a trade agreement with a non-market economy has helped expand trade links between the two countries.