The Effect of Mexican Imports on US State-Level Unemployment Rates: Is Trade an Opportunity or a Threat?

Abstract

The existing literature on the effects of international trade on US labor markets provides mixed evidence. Is it true that trade with Mexico is taking away US jobs? This study seeks to answer that question. Using state-level unemployment data from the Bureau of Labor Statistics and trade data from the Department of Commerce, I assess whether imports from Mexico are related to US state-level unemployment. I expand upon the existing research by extending my period of analysis to account for the evolution of US-Mexico bilateral trade after 2014. Moreover, I use state-level data instead of national estimates to provide a more granular understanding of the policy implications of free trade under the North American Free Trade Agreement (NAFTA) and its successor, the United States-Mexico-Canada Agreement (USMCA). More specifically, considering the high degree of economic integration between Mexico and the United States resulting from NAFTA, I assess whether increased imports from Mexico are associated with changes in state-level unemployment rates. In the end, my study provides only limited evidence to suggest that trade with Mexico is linked to positive outcomes for US workers.