U.S.-Mexico Economic Relations and the Impacts of Cartel Violence

Introduction

Mexico is one of the largest trading partners with the U.S. The relationship extends beyond commerce, including cultural and educational exchange. Thousands of people cross the border daily to work, live, and visit family. In 2023, trade with Mexico totaled $807 billion, exceeding trade with Canada and China, which are two of the other largest trading partners to the U.S. According to the latest data, U.S. exports to Mexico supported close to 1.1 million jobs (State Department, 2025). Considering how intertwined Mexico and the U.S. are, any rise in violence or indicator of political instability will likely deter U.S. investment. The loss of business development and influx of funding will likely increase the number of unemployed in Mexico and crime will likely increase.

U.S.–Mexico economic relations

In 2023, Mexico was the top source of crude oil for the U.S., as well as the top recipient country for the U.S. petroleum and natural gas exports. According to the Bureau of Economic Analysis (BEA), a total of $144.5 billion of foreign direct investment (FDI) was given to Mexico by the U.S. in 2023. To ensure a mutually beneficial trade partnership between the two countries, the United States-Mexico-Canada Agreement (USMCA) was put into force on July 1, 2020. The agreement creates jobs, promotes trade and economic growth, ensuring workers’ rights are upheld, and no forced labor is used to make a product for exporting. The USMCA is scheduled to be reviewed in 2026 and can be extended beyond its expiration date, which is on July 1, 2036; that is if all three countries agree that no provisions need to be made and cooperation remains beneficial for all involved (State Department, 2025).

Security challenges

Despite the economic and cultural relations between the U.S. and Mexico, they share multiple challenges that are sources of tension and strain for their relationship, such as the illegal trafficking and organized crime that likely pose a risk to American companies investing and operating in Mexico. American companies are investing in Mexico on behalf of global firms to move operations closer to reduce production costs. Criminal groups are taking control of larger areas and controlling sectors of the legal economy. Organized crime completely controls or interferes with many business sectors, undermining Mexican government’s jurisdiction and control.  There have been talks within the Trump administration about using military force against these criminal syndicates, specifically the cartels, to curb their influence on Mexico and its population (Chivvis, 2023). The cartels will likely increase the use of violence, especially against civilians as a response to the U.S. military strikes. There’s a roughly even chance that civilians and business assets will be collateral damage during clashes between the cartels and the Mexican and U.S. military.

Risk Analysis

According to the data from Armed Conflict Location and Event Data (ACLED), from January 1 to October 4, 2024, there were 2,436 incidents of political violence and a total of 6,196 fatalities. Out of those fatalities, 4,972 were classified as violence against civilians, which is roughly 80 percent (ACLED). The ACLED defines violence against civilians as when an armed group causes harm or death to unarmed individuals. Violence against civilians is split up further into three sub-event types: sexual violence, attack, and abduction or forced disappearance. Attacks made up nearly all incidents of violence against civilians, with 4,947 events, and the remaining 25 events, classified as sexual violence (ACLED). A new trend that has emerged that adds complexity to the security challenges in Mexico is the weaponization of drones (Bradley, 2025). Before 2020, drone attacks were unheard of, but by 2023, at least 260 incidents were accounted for. Some residents of Michoacan state, in Mexico, say drone attacks are almost a daily occurrence (“Mexican army acknowledges,” 2024). Companies that invest in projects to help with nearshoring objectives will likely reconsider areas in Mexico where cartel violence is intensifying. Company assets, such as employees, facilities, and vehicles used for transportation, will likely be at risk of collateral damage or being targeted by cartels if company operations disrupt smuggling activities.

Bibliography

U.S State Department. (2025). U.S. Relations With Mexico. Available from: https://www.state.gov/u-s-relations-with-mexico/

Chivvis, C. (2023). The U.S.-Mexico Relationship Is About More Than Migration. Available from: https://carnegieendowment.org/posts/2023/12/the-us-mexico-relationship-is-about-more-than-migration?lang=en

Bradley, A. (2025). Cartel war escalates, creates new threat at southern border. Available from: https://www.newsnationnow.com/us-news/immigration/border-coverage/cartels/cartel-war-new-threat-southern-border/

Mexican army acknowledges some of its soldiers have been killed by cartel bomb-dropping drones. (2024).  Available from: https://apnews.com/article/mexico-drug-cartel-drone-attacks-soldiers-killed-572b39c73c030bef20257517d1c4a91d