Mexico replaces China as top source of U.S. imports

For the first time in 17 years, China was dethroned as the United States’ top source of imports by Mexico, offering fresh evidence that Washington’s tariffs and supply-chain diversification efforts are bearing fruit. Mexico outpaced China in 2023 in terms of total value of goods shipped to the U.S., according to data from the U.S. Census Bureau. Total U.S. imports from China last year reached USD427.2 billion, falling by 20.3% compared to 2022, and slightly higher than the USD421.1 billion from Canada in 2023. Meanwhile, the U.S. bought USD475.6 billion worth of goods from Mexico in 2023, increasing by 4.6% year-on-year. China’s share of U.S. imports also dipped to 13.9% in 2023, its lowest level since 2004. China’s share peaked at 21.6% in 2017, before the trade war began and amounted to 16.3% for 2022. China had been the top goods supplier to the U.S. since 2007, when it surpassed Canada.

Geopolitical frictions, including intensifying economic disputes and a simmering tech war, have clouded relations between the world’s two largest economies. Tariffs in place since Donald Trump’s presidency have hit direct shipments from China hard, at an average of 19.3%. The U.S. has also ramped up efforts to “de-risk” its supply chains, with American multinational corporations adopting a “China-plus-one” strategy and reducing reliance on China as a production base. Still, more components made in China pass through Southeast Asia and Mexico – where final products are assembled – before arriving in the U.S., making it hard to track in detail. More Chinese money is also flowing to Mexico, a key destination for U.S. nearshoring. Chinese manufacturers of furniture, home appliances, apparel and automobile parts have flocked to build production bases in Mexico, vying for access to the U.S. market. However, Washington is becoming increasingly wary of the trend.

In December, the U.S. and Mexico agreed to monitor foreign investments and regularly share information about the screening process. At a hearing about the United States-Mexico-Canada Agreement convened by U.S. Trade Representatives, American auto-industry representatives said Chinese manufacturers investing in Mexico taking advantage of lower labor costs and tariffs were “a large problem.” Under the trilateral free-trade agreement that entered into force in 2020, 75% or more of the components of passenger vehicles and light trucks should be produced within the region to qualify for duty-free treatment. “You’re going to have a hard time getting compliance with USMCA requirements,” Jason Wade of the International United Auto Workers said at the hearing. Describing China’s approach in Mexico, Wade added: “They will take the infrastructure and ecosystem that’s been developed over the last 25 years and just pay the fee and have access to the U.S. market,” the South China Morning Post reports.