President Trump’s threats to downgrade the US-Mexico trade relationship could cause deep harm to the Mexican infrastructure sector if carried out, according to fresh research.
While the impact of added impediments to US-Mexico trade, such as tariffs, would vary from industry to industry, any slowdown in trade across sectors would be felt in infrastructure, BMI Research analysts said Wednesday during a web conference.
“The infrastructure network has been geared up to service cross-border trade, including pipelines, power generation, freight rail and ports,” explained Michelle Karavias, BMI’s global head of infrastructure. “So any impact across any of these industries will see a negative implication across the infrastructure space.”
The oil and gas industries, however, would be among the least impacted, as Mexico is a major importer of natural gas and the US is unlikely to impose policies to impede this trade, Karavias suggested. The automotive industry would be one of the most exposed, while the agribusiness, food and beverage sector would fall somewhere in the middle.
Less than a month into Trump’s presidency, it remains unclear how the US-Mexico trade relationship will be affected by the new administration. Noting diplomatic tensions between the two countries, Mark Schaltuper, BMI’s global head of country risk, called preservation of NAFTA in its present form “the least likely outcome in the current environment”.
“We still don’t think that a trade war is an inevitable outcome,” Schaltuper added. “There’s enough at stake for all three sides [including Canada] to come to a formal trade agreement.”
In its 2014-2018 National Infrastructure Plan, the Mexican government laid out plans to invest close to $600 billion in infrastructure, with a significant role envisioned for the private sector. While Trump’s threats to isolate Mexico have caused concern, many infrastructure investors still see opportunities in the country.