Dive Brief:
- The cost of US-Mexico logistics operations is likely to increase approximately 8-14% due to a recent gas price hike in Mexico, the Journal of Commerce reported last week.
- To compensate for the increase, Mexican carriers of all types will have to begin levying fuel surcharges above their current rates, or simply continue increasing rates as they rise throughout the year.
- The Mexican government has announced they would increase rates again in February. Some fear the increases will decrease Mexico's purchasing power and affect exports to Mexico in the long-run.
Dive Insight:
With the removal of government subsidies for Mexican gasoline, logistics operators will have little choice but to increase costs along the supply chain.
As the initial upset from the price increase ends, companies with logistics operations in Mexico are being forced to calculate new costs. Even if incremental, companies sourcing from Mexico may see a rise in transport costs throughout the coming year. As of late February, gas prices will be adjusted daily rather than remain at a fixed rate.
The loss of purchasing power in Mexico is of concern: the peso has already lost about 40 of its value against the U.S. dollar, which benefits the U.S. importer but harms the exporter. The U.S. Trade Representative website notes the U.S. exported $267 billion in goods to Mexico in 2015, while importing $316 billion.
While troubling and costly, this permanent price hike is unlikely to change the trade landscape as thoroughly as President-elect Donald Trump's proposed border tax and renegotiation of NAFTA. If Trump succeeds in his plans, the two moves would seek to reshift the trade balance to favor U.S. exporters, despite current trends.
