2024 is a federal election year in Mexico, as in the US. And as a trading partner and neighbor with the US, what happens in Mexico impacts the US. This year seems to be particularly relevant to the existing trade order and developing financial situation. Mexico is set to elect its first female President. And disputes over the border continue to be an issue. Mexico’s 2024 election may have a significant impact on trade relations, depending on which scenario plays out.
Around the world, 2024 is a significant year for elections. But the federal elections in Mexico will be especially impactful for the US. Current Mexican President Manuel Obrador or AMLO is termed out this year, and his successor hopes to continue his controversial policies.
And these policies affect the United States. Some 5 million US jobs depend on Mexico-US trade. Mexico is largest trading partner with the US, trading $1.5 million USD per minute, relying on the US to buy most of its exports, and providing a cost-effect outsourcing destination for US manufacturers. Because the country boasts a highly skilled workforce, a growing population with a mean age of about 30 years, and strong free trade agreements (including the USMCA), Mexico is highly involved in the every day lives of Americans.
Mexico is also the source of a large supply of illegal drugs and migration into the Unites States, something the US has been increasingly concerned about. And while the current Obrador administration has taken some steps to decrease these flows north, many believe he has not done enough.
The federal administration has also implemented steps considered anti-democratic and unfriendly to business. As founder and leader of the leftist Morena Party, AMLO has sought to enact what he calls Mexico’s “fourth transformation.” And his successor, currently leading in the polls, is likely to continue these policies.
The entire national congress is up for re-election this year, in addition to the presidency, underscoring how important this election is. AMLO has been unable to enact sweeping constitutional reforms due to not possessing a two-thirds majority. But if his party secures this in June of 2024, it is likely major changes would be implemented as a result.
While the official campaigns have not yet begun, two candidates for the presidency are already competing – both of them women. Claudia Sheinbaum is a member of AMLO’s Morena Party, and AMLO has himself already begun campaigning for her. She was formerly the mayor of Mexico City, where she focused on social reforms and progressive policies. She would likely make combatting poverty a focus of her administration.
Her primary revival, Xóchitl Gálvez, is a member of the Náhuatl people and a champion for the rights of indigenous peoples and various environmental causes. She is viewed as more pro-business and would likely make reducing crime rates a focus of her administration. Crime has increased significantly during the six years of the Obrador administration.
Current polls show Sheinbaum leading Gálvez by 20%.
Over the past few decades, Mexico has been moving away from authoritarian and strong-man politics and towards more open and transparent government based on democratic ideals. As a result, the nation’s economy has boomed. However, the Obrador administration has been a departure from this trend. Mexico’s 2024 elections could add staying power to this departure if Sheinbaum is elected. And if her party wins a two thirds majority in the legislature, these could bring about long term changes in Mexico-US trade relations by institutionalizing constitutional reforms that discourage new investment and business.
Additionally, the immigration situation could become a sticking point with the US, particularly if Donald Trump is elected President in November. Both countries are holding federal elections this year. Trump is more likely to press the issue on Mexico hard, having threatened tariffs in the past.
Sheinbaum is less likely to play ball, however. And an impasse could be detrimental to both countries. Gálvez, on the other hand, could be far more sympathetic to the demands of the US government in limiting the flow of illegal drugs and immigrants. Depending on the scenario, this election could negatively impact Mexico-US relations by sparking a controversy that brings about trade changes.
On the other hand, these spats might be moderated by broader and more entrenched forces currently at work. Carlo Torres Vila, chairman of BBVA, pointed out that Mexico’s 2024 elections may not impact trade relations at all. Thanks to the USMCA, negotiated by Trump, tariffs and trade norms are already well established. And because Mexico-US trade has increased so much since 2020, the US relies heavily on Mexico’s cooperation. The countries have a well-established, highly integrated network of suppliers and manufacturing operations that even Asia is leveraging to access the US market.
While trade between the two countries could potentially be impacted by upcoming elections, there is reason to believe the relationship between them is a long-term reality. Nevertheless, the elections of 2024 bear watching.
