Economic relations between the United States and China have severely deteriorated in recent years as Beijing has fought aggressively on trade and made ominous military gestures in the Far East.
Mexico surpassed China as the primary source of goods imported to the United States for the first time in more than two decades. This shift underscores the escalating tensions between Washington and Beijing, as well as US efforts to diversify imports towards countries that are deemed more friendly and geographically closer.
Data released by the US Commerce Department on Wednesday revealed that the value of goods imported from Mexico to the United States increased by nearly 5% from 2022 to 2023, surpassing $475 billion. Concurrently, the value of Chinese imports plummeted by 20% to $427 billion.
The last instance where the value of Mexican goods imported to the United States exceeded that of China was in 2002. Economic relations between the United States and China have significantly soured in recent years, with Beijing engaging aggressively in trade disputes and displaying assertive military posturing in the Far East.
The Trump administration began imposing tariffs on Chinese imports in 2018, arguing that Beijing’s trade practices violated global trade rules. President Joe Biden retained those tariffs after taking office in 2021, making clear that antagonism toward China would be a rare area of common ground for Democrats and Republicans.
As an alternative to offshoring production to China, which U.S. corporations had long engaged in, the Biden administration has urged companies to seek suppliers in allied countries (“friend-shoring’’) or to return manufacturing to the United States (“reshoring’’). Supply-chain disruptions related to the COVID-19 pandemic also led U.S. companies to seek supplies closer to the United States (“near-shoring’’).
Mexico has been among the beneficiaries of the growing shift away from reliance on Chinese factories. But the picture is more complicated than it might seem. Some Chinese manufacturers have established factories in Mexico to exploit the benefits of the 3-year-old U.S.-Mexico-Canada Trade Agreement, which allows for duty-free trade in North America for many products.
Mexican President Andrés Manuel López Obrador said this week that the trade status gives Mexico new leverage, saying it would make it hard for the U.S. to close the two countries’ border to limit immigration, as suggested in negotiations on a border bill in the U.S. Senate.
“The negotiation is proposing closing the border,” he said. “Do you think Americans, or Mexicans, but especially the Americans, would approve that? The businesses wouldn’t take it, maybe one day, but not a week.”
Some industries — especially auto manufacturers — have set up plants on both sides of the border that depend on each for a steady supply of parts.
Derek Scissors, a China specialist at the conservative American Enterprise Institute, noted that the biggest drops in Chinese imports were in computers and electronics and chemicals and pharmaceuticals — all politically sensitive categories.
“I don’t see the U.S. being comfortable with a rebound in those areas in 2024 and 2025,” Scissors said, predicting that the China-Mexico reversal on imports to the United States likely “is not a one-year blip.’’
Scissors suggested that the drop in U.S. reliance on Chinese goods partly reflects the wariness of Beijing’s economic policies under President Xi Jinping. Xi’s draconian COVID-19 lockdowns brought significant swaths of the Chinese economy to a standstill in 2022, and his officials have raided foreign companies in apparent counterespionage investigations.
“I think it’s corporate America belatedly deciding Xi Jinping is unreliable,” he said.
Overall, the U.S. deficit in the trade of goods with the rest of the world — the gap between the value of what the United States sells and what it buys abroad — narrowed 10% last year to $1.06 trillion.
With inputs from AP
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