Automotive Weakness and Oil Slump Drive Decline in Mexican Exports

Concerns mount over economic headwinds and trade policy uncertainty despite resilience in US-bound shipments

Mexican merchandise exports registered a notable decline in February, raising concerns amid ongoing economic headwinds and persistent trade policy uncertainties linked primarily to the United States. Total exports reached $49.28 billion for the month, marking a 2.9 per cent contraction compared to the same period last year, according to data released by the national statistics agency, Inegi.

The downturn was driven by weakness across both non-oil and oil sectors, painting a complex picture of the country's external trade performance. The overall decrease masked a sharper fall in oil exports, which plummeted by 24.4 per cent year-on-year. Non-oil exports, which constitute the vast majority of Mexico's foreign sales, saw a more moderate decline of 1.7 per cent.

However, this headline non-oil figure obscured significant weakness within key manufacturing segments. The crucial automotive sector, a bellwether for Mexican manufacturing prowess and integration into North American supply chains, experienced a sharp export plunge of 15.2 per cent. Analysts attribute the sluggish performance to a confluence of factors, including softer domestic economic activity and lingering uncertainty surrounding trade relations, particularly the potential for renewed tariff friction with the US, harking back to policies under the previous Trump administration.

Data from Inegi further detailed a geographical divergence in non-oil export performance. Shipments destined for the United States, Mexico's largest trading partner by a considerable margin, edged down by a marginal 0.2 per cent. This relative stability suggests continued, albeit slightly subdued, demand from the US market. In stark contrast, non-oil exports directed to the rest of the world experienced a significant contraction, falling by 9.5 per cent, indicating considerably weaker demand from other global markets.

Manufacturing exports, the backbone of Mexico's export economy, totalled $44.24 billion in February, reflecting an annual decrease of 1.8 per cent overall. Within this broad category, the automotive industry's difficulties were paramount (down 15.2 per cent). Further analysis revealed declines were also registered in other significant areas, including textiles and footwear (down 14.4 per cent), steelmaking (down 7.0 per cent), and chemicals (down 6.1 per cent).

The automotive sector's challenges were particularly pronounced when examining destination markets. While sales to the US contracted by 10.7 per cent, exports to other international destinations suffered a much steeper fall of 40.2 per cent, highlighting the sector's vulnerability beyond its primary North American market.

The slump in the oil sector saw total petroleum exports amount to $1.988 billion. This comprised $1.452 billion generated from crude oil sales and $536 million from other oil-based products.

The agricultural and fishing sector also faced headwinds, contributing to the overall export decline. Exports from this segment totalled $2.180 billion, marking a 6.1 per cent annual fall. Significant reductions were observed across various products, including steep drops in exports of cattle (down 73.2 per cent), fresh vegetables and greens (down 18.6 per cent), strawberries (down 16.8 per cent), and tomatoes (down 16.7 per cent), alongside a fall in other fruit exports (down 6.5 per cent).

Despite the generally subdued picture presented by the February data, there were isolated bright spots offering a modicum of encouragement. Exports of frozen shrimp surged by an impressive 75.5 per cent, and avocado exports, a key agricultural commodity for Mexico, saw a robust increase of 34 per cent. Furthermore, the non-oil extractive industries provided a positive counter-trend, with exports reaching $872 million, representing a healthy 17.4 per cent increase year-on-year.

Looking at the first two months of the year offers a slightly broader perspective, smoothing out some monthly volatility. Total exports for January and February reached $93.726 billion. This cumulative figure represents a modest 0.9 per cent increase compared to the same period in the previous year. However, this slight overall gain reflects a significant divergence: non-oil sales managed a 3 per cent gain over the bimester period, while oil sales contracted sharply by 32.8 per cent.

Despite these monthly and sectoral fluctuations, the fundamental structure of Mexico's external trade remained broadly stable. Manufactured goods continued to dominate the export landscape, accounting for 89.6 per cent of the total value. Agricultural products represented 4.7 per cent, followed by oil products at 3.9 per cent, and non-oil extractive goods contributing the remaining 1.8 per cent.

The February figures underscore the challenges facing Mexico's export sector, particularly the sensitivity of its manufacturing base to global demand shifts and trade policy jitters. While the relative stability of exports to the US provides some underpinning, the sharp declines in automotive shipments and sales to other parts of the world warrant close monitoring in the coming months.