Mexico's Economy, Explained for Americans

Mexico is the United States' southern neighbor, second-largest trading partner, and the second-largest economy in Latin America after Brazil. For American readers, the easiest way to picture it: Mexico has about 130 million people — more than any U.S. state and about 40% of the U.S. population — in a country roughly the size of three Texases. The U.S. and Mexican economies are tied together so tightly that what happens to one quickly shows up in the other.

This is a plain-English tour written for American readers. For the U.S. picture, see The State of the U.S. Economy and the broader Economy hub. For other countries, see the country economies index.

How big is the Mexican economy?

For example, Mexico's recent annual GDP has run around 31 trillion pesos, or roughly $1.8 trillion USD, according to the World Bank and Mexico's national statistics agency, INEGI. That makes Mexico about one-fifteenth the size of the U.S. economy by output. GDP per person sits around $13,000 to $15,000 USD — much lower than the U.S. average, though Mexican costs of living are also lower.

The official Mexican numbers are published by INEGI, and the central bank publishes financial statistics through the Bank of Mexico (Banxico).

The biggest industries

Mexico's economy is one of the most manufacturing-heavy emerging economies in the world. The main pillars:

• Manufacturing for export — especially cars and car parts, electronics, appliances, and medical devices. Most of these exports go to the U.S.
• Automotive — Mexico is one of the top global car producers. GM, Ford, Stellantis, Volkswagen, Nissan, Toyota, BMW, Audi, Honda, and Kia all have major plants in Mexico.
• Oil and energy — the state oil company Pemex is one of the largest in Latin America, though oil's share of Mexico's economy has shrunk as manufacturing has grown.
• Tourism — beaches, ancient sites, and major cities draw tens of millions of visitors a year, the U.S. being the largest source.
• Agriculture — Mexico is a top global supplier of avocados, tomatoes, berries, and beer (Modelo and Corona, both made in Mexico, are the top-selling beers in the U.S.).
• Mining — silver, copper, zinc, and gold.
• Remittances — money sent home from Mexicans working abroad, mostly in the U.S., adds up to more than $60 billion USD per year, larger than oil revenue in recent years.

Currency and the central bank

Mexico uses the Mexican peso (MXN). One U.S. dollar typically buys somewhere between 17 and 21 pesos, depending on the exchange rate. The peso is one of the most actively traded emerging-market currencies.

The Bank of Mexico (Banxico) is Mexico's central bank. It targets 3% inflation per year (a bit higher than the U.S. Federal Reserve's 2% target) and sets a benchmark interest rate. Banxico is well respected internationally for its independence and its inflation-fighting record over the past three decades.

Trade with the United States

Mexico has been the United States' largest trading partner in most recent years, with annual two-way trade around $800 billion USD. Mexico sells the U.S. cars, electronics, medical devices, agricultural products, and oil. The U.S. sells Mexico machinery, refined fuels, electronics, and grains.

The trade rules live in the U.S.-Mexico-Canada Agreement (USMCA), the same agreement that governs U.S.-Canada trade and that replaced NAFTA in 2020. The U.S. side sits at the International Trade Administration.

A growing share of factories that used to be in China have moved to Mexico in recent years — a shift sometimes called nearshoring. Cities along the U.S. border like Monterrey, Tijuana, and Ciudad Juárez have boomed because of it.

Remittances and the labor connection

Mexicans working in the U.S. send tens of billions of dollars home each year — over $60 billion USD recently — supporting families and small economies across rural Mexico. That flow is one of the largest sources of foreign income for Mexico, larger than oil revenue or tourism in some recent years.

Cost of living

Cost of living in Mexico varies dramatically. Mexico City has expensive neighborhoods that rival mid-sized U.S. cities, but most of the country is far cheaper than the U.S. — including in rents, restaurants, and healthcare. That's part of why Mexico has become a popular destination for American retirees and remote workers.

How Mexico's economy affects the U.S.

A weaker peso makes Mexican exports cheaper for U.S. buyers and tourism cheaper for U.S. travelers. A strong Mexican economy pulls in more U.S. goods and reduces migration pressure. Big U.S. companies — automakers, electronics firms, retailers — run integrated supply chains that cross the U.S.-Mexico border multiple times before a finished product reaches a U.S. store. Disruptions on either side of that border show up quickly in U.S. prices and store shelves.

A two-track economy

Mexico is sometimes described as having two economies running side by side. The first is the modern, export-oriented industrial economy of the north and center: large factories in Monterrey, Saltillo, Querétaro, Aguascalientes, and the border cities, paying middle-class wages by Mexican standards and tightly linked to U.S. supply chains. The second is the informal economy of southern states like Chiapas, Oaxaca, and Guerrero, where smaller-scale farming, family businesses, and informal work dominate, and where wages and access to formal credit are far lower. National policy debates often come back to how to extend the gains of the first Mexico to the second.

The U.S.-Mexico border economy

The 1,950-mile U.S.-Mexico border is one of the most economically active stretches of border on Earth. On the Mexican side, cities like Tijuana, Ciudad Juárez, Reynosa, and Matamoros host hundreds of factories — many called maquiladoras — that import parts from the U.S., assemble them, and ship the finished goods back. Texas border cities like Laredo, El Paso, and McAllen have grown around the trucking, warehousing, and customs-broker businesses that handle the flow. Hundreds of thousands of people cross legally for work, school, and shopping each day. When border crossings slow down — for any reason — the U.S. and Mexican economies both feel it within hours.

A note on the numbers

Numbers in this article change every quarter. Always check the latest from the World Bank Mexico profile, the International Monetary Fund, the Bank of Mexico, and INEGI for the most current data.