Earlier in the summer we penned a post which received quite a bit of attention both from the press and from readers. That post dealt with the question of where to source various metal parts, China v. Mexico. Other anecdotal evidence suggests that companies are looking at Mexico. MFG.com CEO Mitch Free mentioned to us that they were seeing a lot of activity from Mexican sources for their RFQ volume. But the bulk of their “award” volume still remains with China.
And though that is happening, perhaps the bigger trend we are seeing is companies expanding their net ever wider by examining multiple global sources in addition to China. And the trade data is supporting that assertion. According to yesterday’s Wall Street Journal, our trade deficit still increased with key exporting countries/regions such as China, Japan, Canada and the Euro zone and ironically, it decreased with Mexico (meaning we exported more to Mexico then we imported). What does that mean?
It’s true to say that the low dollar has helped the US export its way into an improved trade balance. But the high cost of oil (which we obviously imported) had a huge and negative impact on the trade deficit for the month of July. A rising dollar is going to encourage more imports which will again harm America’s trade balance.
But as companies weigh the total costs of sourcing or manufacturing in far-away lands or nearby, one thing is for certain, Mexico ought to remain on the short list.