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The global fashion business journal

23 Sep 201905:27

Mexico, shelter of 'made in the USA' fashion: exports soar 32% in a decade

The country holds for now the export business of the United States in Latin America, with an open conflict between both countries that can affect the tariff systems.

21 Jun 2019 — 08:00
Arturo Juárez
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Mexico, shelter of 'made in the USA' fashion: exports soar 32% in a decade

 

The United States relies on Mexico to get its business moves beyond its borders. In the last decade (period between 2006 and 2016), exports of clothing from the United States to Mexico have increased by 32%, according to data from the World Trade Organization.


Due to the proximity of Mexico, and the ease of business that this issue has, US companies have focused on their southern neighbor to carry out their clothing exports. It is a market close to the big American companies, which use to have good reception among the Mexican public. However, political tension is beginning to affect on trade.

Exports of clothing from the United States to Mexico have skyrocketed in the last decade. Between 2006 and 2016, exports have grown by 32% as a whole. The evolution, however, has been very variable during the last decade. In 2006, the United States exported 997 million dollars in clothing. The time of the crisis meant a collapse of the business, which in 2008 fell to 682 million dollars.

 

 



Exports of clothing from the United States to Mexico rose again in 2010, reaching its historical peak of the decade in 2015, with 1,106 million dollars. However, the arrival of Donald Trump to the presidency of the United States in 2016 once again affected the business of US companies in Mexico. The fear of a possible rupture of the old free trade agreement caused the exports of clothes to return falling until 940 billion dollars.

The dynamics in the rest of Latin America is totally different. While the business with Mexico has grown, exports of American clothing to the rest of the region have plummeted by 26.5% between 2006 and 2016. The fall is very significant since the United States exported 1,369 million dollars of clothing in 2006 to South America. The crisis hit the business on its whole and suffered a notable decline. Exports of clothing have not recovered and, in 2016, the sector exported 709 million dollars in clothing to South America.

Latin America is not spared from the drop in clothing exports, except for Mexico. The sector has seen how between 2006 and 2016 American fashion companies have suffered significant falls, especially in times of crisis. As a whole, exports contracted by 1%, but in times of crisis, the drop was 30%. The region experienced a rebound in 2014, but the arrival of Trump to the presidency in 2016 hit exports again, which fell by 14% to 1,649 million dollars.

 

 

 

 

One of the main partners of foreign companies in Mexico is the distribution company Grupo Axo, which operates almost 750 stores in Mexico, with PVH as one of its main customers, through Calvin Klein and Tommy Hilfiger. Another of the companies managed by Grupo Axo in Mexico is Guess, with 53 stores open in the country. Abercrombie & Fitch, Victoria Secret and Coach are other brands of the group currently being managed in Mexico, as well as in Chile.


Other US companies have also seen business opportunities in Mexico and have ventured to expand their network of stores throughout the country. This is the case of Gap, which currently has 69 stores, Nike, with 19 establishments and Levi's, with 47 points of sale. The American big companies have focused on Mexico for expansion, but Trump's continued threats to free trade are affecting the business model in the country.

The problem with the rebound of immigration on the border between Mexico and the United States has caused an increase in tension between the two countries, which has resulted in tariff rates disputes. Trump recently threatened to raise tariffs from 5% to 25% to Mexico if the country did not act against the migratory flow. Finally, the announcement of forceful measures by Mexico suspended the threat at the moment.

Mexico had already dealed with Trump's first threat to free trade: Trump's pressures to withdraw Tlcan (Nafta, for its acronym in English). Mexico, Canada and the United States signed in 2018 a new free trade agreement, known as Aeumc (Usmc, for its acronym in English), which replaced the old Tlcan, and which contemplated the reduction of the quotas of clothing that did not comply with the rules of origin.

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