Staff Pick: Which States Account for Our Trade Deficit with Mexico?

The On the Economy blog will periodically rerun blog posts that were of particular interest. The following is a post by B. Ravikumar and Evan Karson from March 2017 providing a state-by-state look at the U.S. trade deficit with Mexico.

Trade between the U.S. and Mexico is currently a hot topic for discussion among policymakers.¹ In 2015, the U.S. ran a $60.7 billion trade deficit with Mexico, equivalent to 0.34 percent of U.S. gross domestic product that year. In this blog post, we examined the current balance of trade with Mexico at the state level using U.S. Census Bureau data.

The figure below depicts exports to Mexico as a percentage of gross state product (GSP) for each of the 48 contiguous U.S. states in 2015.²

States that border Mexico, such as Texas (5.7 percent) and Arizona (3.2 percent), tend to export higher percentages of their output to Mexico relative to other states. Meanwhile, most states exported between 0 and 1.5 percent of their output in 2015 to Mexico.

The next figure shows the ratio of imports from Mexico to GSP in 2015.

Michigan (9.4 percent), Texas (5.2 percent) and Kentucky (3.2 percent) imported the most relative to their GSP. In general, state economies in the Midwest and Southeast were relatively high importers of goods and services from Mexico.

Lastly, we illustrated the dollar value of net exports by state in 2015.

Eighteen state economies had trade surpluses with Mexico, while 32 had deficits. Texas ran the largest trade surplus at roughly $8.5 billion, followed by Louisiana ($4.4 billion) and Arizona ($1.6 billion).

The top trade deficits were markedly deeper though, with Michigan and California running the largest trade deficits (roughly $32 and $18 billion, respectively).

Most states, however, had relatively small trade balances with Mexico; 32 states had net exports to Mexico within only ±0.5 percent of GSP. Thus, while several states are engaged in trade with Mexico, only two states account for most of the U.S. trade deficit with Mexico.

Notes and References

¹ For example, the debate recently drew comments from former Mexican president Felipe Calderón. See Calderón, Felipe. “America’s Abuse of Mexico Is an Assault on Free Trade,” Financial Times, Feb. 15, 2017.

² Not pictured are Alaska and Hawaii, which had exports, imports and net exports with Mexico of less than 0.1 percent of GSP in 2015.

Additional Resources

• On the Economy: How Tourism Affects China’s Current Account Surplus
• On the Economy: How Do Imports Affect Manufacturing Jobs?
• On the Economy: How Does Terrorism Affect Trade?