In a notable economic shift, Mexico has risen as the primary source of imports to the United States, surpassing China for the first time in over twenty years. According to a report from the Associated Press (AP), data released by the US Commerce Department on Wednesday shows that the value of goods imported from Mexico to the US increased by nearly 5 percent in 2023, reaching over $475 billion, while imports from China experienced a significant decline of 20 percent, totaling $427 billion.
This pivotal change in import dynamics underscores the escalating tensions between Washington and Beijing, with the US actively seeking to diversify sources and cultivate relationships with neighboring countries. The imposition of tariffs on Chinese imports initiated by the Trump administration in 2018 has been continued by President Biden, reflecting a bipartisan commitment to addressing trade imbalances and apprehensions regarding Beijing’s trade practices.
Amid strained economic relations between the US and China, the Biden administration has been advocating for companies to explore alternative sourcing strategies such as “friend-shoring” in allied nations or “reshoring” by bringing manufacturing back to the US.
This shift is a response to the challenges posed by offshoring to China and disruptions in global supply chains due to the COVID-19 pandemic, prompting companies to seek suppliers closer to the United States, a strategy known as “near-shoring.”
The increasing trend of importing goods from Mexico presents a complex narrative. While Mexico has benefited from the move away from Chinese factories, some Chinese manufacturers have established operations in Mexico, capitalizing on the advantages of the US-Mexico-Canada Trade Agreement.
This agreement, in force for three years, facilitates duty-free trade in North America for many products.
Derek Scissors, a China specialist at the American Enterprise Institute, pointed out that significant drops in Chinese imports were observed in politically sensitive categories such as computers, electronics, chemicals, and pharmaceuticals.
Scissors suggested that the reduction in US reliance on Chinese goods is influenced by concerns about Beijing’s economic policies, particularly under President Xi Jinping. Factors such as Xi’s stringent COVID-19 lockdowns in 2022 and counterespionage investigations targeting foreign companies have contributed to a reevaluation of China’s dependability.
He indicated that the shift in import patterns may not be a temporary change, stating, “I don’t see the US being comfortable with a rebound in those areas in 2024 and 2025.”
Overall, the US trade deficit in goods with the rest of the world narrowed by 10 percent in the past year, amounting to $1.06 trillion.