Mexico Replaces China as America’s Top Trade Partner, While China’s Foreign Trade Continues to Decline

A part of the urban area in the Mexican state of Nuevo Leon, where Tesla could build a new electric car plant, in San Pedro Garza Garcia, Mexico, on Dec. 19, 2022. Daniel Becerril/Reuters

Mexico has become the largest trading partner of the United States, surpassing China and Canada, according to statistics released July 12.

The trade volume between the United States and Mexico reached $263 billion in the first four months of 2023, wrote Luis Torres, a senior business economist at the Federal Reserve Bank of Dallas in a post. Trade between the two countries accounted for 15.4 percent of goods exported and imported by the United States, which surpassed totals for U.S. trade with Canada and China, which were 15.2 percent and 12 percent respectively.

According to public data, China was the largest U.S. trade partner for most of the 2010s, until the outbreak of COVID-19 in 2020, when it was replaced by Mexico.

Mr. Torres said that the change shows the effect of the United States–Mexico–Canada Agreement, which was finalized during former President Donald Trump’s tenure. It indicated a shift toward a “nearshoring” practice in global trade, which aims to bring supply chains for crucial goods to countries that are closer physically and politically. Such a practice not only reduces the pressure on the long-distance offshore supply chain, but also poses a challenge to China’s world economic status because it reduces the world’s dependence on Chinese-made goods.

President Donald Trump signs trade sanctions against China in the Diplomatic Reception Room of the White House in Washington, on March 22, 2018. Mandel Ngan/AFP/Getty Images

Since its accession to the World Trade Organization in 2001, China has been integrated into the U.S. economy despite not complying with economic and trade regulations. The United States has expressed concern about China’s unfair economic practices; Secretary of the Treasury Janet Yellen voiced this concern during her recent visit to China.

The outbreak of COVID-19 in 2020 and the Chinese regime’s draconian lockdown measures, which severely disrupted global supply chains, began to accelerate the process of companies shifting their supply chains out of China.

Michael Burns, a managing partner at supply chain-focused investment firm Murray Hill Group, said that the recent shift by businesses to relocate production and supply chains closer to their markets isn’t about deglobalization, but rather a shift of focus onto regional networks.

China’s Foreign Trade Continues to Decline

Last month, China’s exports fell 12.4 percent year-over-year, to the lowest level since March 2020. Imports fell by 6.8 percent year-over-year, which was a significantly steeper decline than expected, according to official data. The Chinese regime’s official explanation for the drop in exports was that demand had declined in the international market.

However, many Chinese companies are also building factories in Mexico—moving production out of China—which also has contributed to the rise of Mexican manufacturing, according to U.S.-based current affairs commentator Qin Peng on his talk show on NTD “Qin Peng Observing.”

Workers assembling toys at the Mendiss toy factory in Shantou, Guangdong Province, on May 20, 2020. Noel Celis/AFP via Getty Images

Meanwhile, the average U.S. tariff on Chinese goods is 19.3 percent, far higher than the 9 percent level of other “most-favored nations.”

The tensions between the United States and China in recent years have led to the West’s derisking from China, which significantly affected China’s foreign trade. Observers believe that this won’t change in the foreseeable future despite recent visits to China by high-level U.S. officials.

On July 13, major Chinese finance media Caixin.com stated in an editorial that “the differences between China and the United States are in multiple areas and deep-seated. No one expects that a few visits by high-level officials will bring the relationship between the two countries back on track. However, maintaining contact and strengthening communication can at least prevent the situation from getting out of control.”

Zheng Xuguang, the host of Xuguang Times Review, told The Epoch Times on July 13 that the three components of China’s GDP—exports, investment, and consumption—are all declining.

“China’s economy is mainly driven by exports,“ Mr. Zheng said. ”In fact, judging from the figures in the first half of this year, Guangdong Province’s exports in the first half of the year were negative, while Jiangsu Province’s growth was probably less than 1 percent. Overall, China’s import is even worse. I think China’s current foreign trade is in a very dangerous situation because the crises are from the top and bottom.

“The middle and low-end manufacturing is now being transferred to Vietnam, India, and Mexico. Not only are foreign companies moving, Chinese companies are also leaving. The high-end manufacturing is affected by the United States’ increased sanctions, especially the restriction on exporting high-end chips to China. This means that Apple’s mobile phones’ production in China may be finished, which is very bad for China’s economy.”