For the first time in more than 20 years, the United States purchased more goods from Mexico than China in 2023, highlighting a change in international trade and spotlighting America’s de-risking efforts.
The United States ran a $152.38 billion trade deficit with Mexico, up 16 percent from the previous year.
By comparison, the United States bought roughly $427 billion in goods from China and shipped nearly $148 billion. The U.S. trade deficit with Beijing was close to $280 billion, narrowing by 27 percent from 2022.
That made Mexico the chief source of official imports.
The last time U.S. trade with Mexico outpaced trade with China was in 2002. That year, U.S.–Mexico trade totaled about $232 billion while U.S.–China trade was nearly $148 billion.
As part of the intensifying shift in global trade, Census data confirmed that December 2023 imports from South Korea were the highest on record, topping $116 billion. This marked the third consecutive year of rising imports. Plus, trade deficits with Germany, India, Italy, and Taiwan touched record levels.
Overall, America’s goods and services trade gap fell by 19 percent year over year to $773.4 billion. Exports edged up by $35 billion to $3.05 trillion, and imports tumbled by $142.7 billion to slightly below $3.83 trillion.
That was the sharpest drop since 2009 amid companies’ efforts to limit inventory buildups and consumers’ spending patterns transitioning to services.
The goods deficit slipped by $121.3 billion to $1.06 trillion, and the services surplus rose by $56.4 billion to $288.2 billion.
The trade data further revealed that exports of foods and feeds and imports of consumer goods were the lowest since 2020.
Shipments of capital and consumer goods and motor vehicles were the highest on record.
The petroleum surplus rose to an all-time high of $30.1 billion as exports of natural gas and oil slumped in 2023.
In June 2018, then-President Donald Trump imposed 25 percent tariffs on $50 billion of Chinese goods. Beijing retaliated with its own set of tariffs, targeting more than 1,100 U.S. exports.
The Republican presidential front-runner revealed in a recent interview with Fox News’ “Sunday Morning Futures” that he’s considering 60 percent tariffs on Chinese goods if he’s elected, noting that he’s not seeking to trigger another trade war.
“We have to do it,” President Trump said. “It’s not a trade war. I did great with China with everything. I want China to do great, I do.”
For the most part, President Joe Biden has kept the Trump-era tariffs intact. However, reports suggest that the White House has been considering doubling down on this trade policy by raising levies on various Chinese goods, such as electric vehicles, as part of the Biden administration’s efforts to enhance the domestic clean-energy sector.
Before a crowd of United Auto Workers members, President Biden promised that he would “not let” China dominate the global electric vehicle market “by using unfair trade practices.”
Over the past year, President Biden has embarked on a campaign of diversifying the global supply chain by no longer depending solely on China. U.S. officials have described this as de-risking rather than decoupling, expanding trade relations with a whole host of countries, particularly in the Indo–Pacific.
A breakup between the world’s two largest economies would result in “significant negative global repercussions” and be “simply not practical,” she said.
“Instead, we are de-risking and diversifying, by investing at home and strengthening linkages with allies and partners around the world.”
China’s economy has been turbulent over the past year, fueled by a collapse in the property sector and mounting debt challenges. The stock market has responded to the chaos by falling sharply, prompting the government to float a rescue package.
Federal Reserve Chair Jerome Powell acknowledged what is unfolding in Beijing, noting that it’s unlikely the United States would suffer from the instability.
Reshoring Incentives
President Biden has fostered the reshoring of U.S. manufacturing and foreign inbounding as part of the Biden administration’s landmark legislation—the Inflation Reduction Act and the CHIPS and Science Act.By extending hundreds of billions of dollars in federal and state subsidies, whether grants or tax credits, the White House has been hoping to ensure that more domestic and foreign corporations establish or expand their presence stateside.
The challenge for the industry has been that U.S. manufacturing is paralyzed in contraction or stagnation, depending on the metrics.
A chorus of economists purports that current industrial policy is not leading to a U.S. manufacturing revival.
Instead, these legislative pursuits have been another mechanism of “saying the federal government picks winners and losers,” says Jason Sorens, an economist with the American Institute for Economic Research.
