US Buys More from Mexico Than China for First Time in 20 Years

For the first time in two decades, Mexico has surpassed China as the leading source of goods imported by the United States, according to figures for 2023 by the US Commerce Department.

Amid heightened tensions between the US and China, the trade deficit with China narrowed significantly last year, with imports dropping by 20% to US$427.2 billion (MX$7,261.6 billion), while imports from Mexico remained stable at US$475.6 billion. 

US consumers and businesses have turned to Mexico, Europe, South Korea, India, Canada, and Vietnam for imports such as auto parts, shoes, toys, and raw materials. Despite an 18.7% decrease in the overall trade deficit, US exports worldwide increased slightly in 2023, while imports declined, particularly in crude oil and consumer goods like cellphones and clothing.

From January to November 2023, US imports from China decreased by over 21% compared to the same period the previous year, while imports from Mexico increased by almost 5%. Chinese imports as a percentage of total imports dropped to 13.9%, the lowest level since 2004, while Mexico's share reached a record high of 15.5%. This decline in Chinese trade with the US is attributed in part to heightened demand during the pandemic, with US consumers favoring Chinese-made products.

Economists suggest that trade patterns are normalizing after the surge in Chinese imports during the peak of the pandemic in 2021 and subsequent adjustments in 2022. The reduction in trade with China is linked to tariffs imposed by the Trump administration and maintained by the Biden administration, leading multinationals to shift manufacturing out of China and into other countries.

Geopolitical risks are driving companies to explore alternative markets according to experts, particularly those with low costs and stable trading relationships with the US, such as Mexico and South Korea. South Korean firms, benefiting from President Biden's new climate legislation and US constraints on China's access to electric vehicle tax credits, have seen increased trade with the US. This trend underscores the strengthening alliance between the US and South Korea amidst growing American skepticism of China.

According to The New York Times, Ralph Ossa, the chief economist for the World Trade Organization, stated that while trade between the United States and China had not collapsed, it had been growing approximately 30 percent more slowly compared to trade between those countries and the rest of the world.

Ossa highlighted two recent episodes in history where US-China trade experienced significant slowdowns. The first occurred in 2018 when trade tensions between the two countries escalated. The second was prompted by Russia's invasion of Ukraine, leading the United States and its allies to impose strict sanctions and trigger further reshuffling of global trade relationships.