“The eagle dethrones the dragon,” screamed a headline in the El Financiero newspaper on Wednesday after the publication of data that showed that Mexico surpassed China to become the top exporter of goods to the United States in 2023.
Last year was the first year in two decades that the United States purchased more goods from Mexico than from China, a situation that largely came about due to the “decoupling” of the world’s two largest economies amid the ongoing China-United States trade war.
However, Mexico’s export industry also got a boost from the growing nearshoring phenomenon as more and more foreign companies — including Chinese ones — establish a presence here, or expand their existing one, in order to take advantage of the country’s proximity to the United States, competitive labor costs and other factors.
In addition to being the top exporter of goods to the United States last year, Mexico was its northern neighbor’s largest overall trade partner, with two-way trade totaling almost US $800 billion.
Mexico gains ground, China goes backwards
Data published by the U.S. Census Bureau and the U.S. Bureau of Economic Analysis on Wednesday showed that Mexico exported goods worth $475.6 billion to the U.S. in 2023.
Mexican exports increased 4.6% compared to 2022, while Chinese exports declined by more than 20% to $427.2 billion.
Considering the total value of exports of both countries to the U.S., Mexico has gone from trailing China by over $80 billion in 2022 to beating it by close to $50 billion last year, a turnaround of some $130 billion in the space of just 12 months.
Quoted in a New York Times report, the chief economist of Moody’s Analytics, Mark Zandi, said that the United States and China — the top exporter to the U.S. for the past 15 years — “are decoupling, and that’s weighing heavily on trade flows.”
“Economists say the relative decrease in trade with China is clearly linked to the tariffs imposed by the Trump administration and then maintained by the Biden administration,” the Times reported.
Mexico’s share of the $3.1 trillion market for imports in the United States was 15.4% last year, ahead of China on 13.9% and Canada on 13.7%.
El Financiero reported that the increase in Mexican exports to the U.S. is due in large part to nearshoring.
“With growing labor costs in China and geopolitical tensions with this country, Mexico has consolidated itself as an attractive alternative for United States supply chains,” the newspaper said.
Companies from numerous countries have established a presence in Mexico in recent years or announced their intention to do so. They include Chinese companies, although China is not yet among the top foreign investors in Mexico, at least not officially.
Mexico gives China “a back door” into the United States because along with the U.S. and Canada it is party to the USMCA free trade pact, The Economist said in a report last November.
The presence of Chinese companies in Mexico, especially automotive ones, is a growing concern in the United States.
In late 2023, Mexico and the United States struck an agreement to cooperate on foreign investment screening as a measure to better protect the national security of both countries. The plan appeared to be motivated to a large degree by a desire to stop Chinese investment in Mexico that is considered problematic.
For the first time in four years, Mexico was the United States’ top trade partner
Two-way trade between Mexico and the United States was worth $798.8 billion in 2023, an increase of 2.5% compared to the previous year.
Mexico dislodged Canada as the United States’ largest trade partner after Canada claimed the top spot in 2022.
The last time Mexico was the United States’ top trade partner was in 2019.
China was a distant third after Mexico and Canada last year. United States exports to the East Asian powerhouse were worth a relatively low $147.8 billion in 2023, a figure equivalent to just one-third of the value of Chinese exports to the U.S.
The United States is easily Mexico’s largest export market
Data published by the national statistics agency INEGI last month showed that just over 83% of Mexico’s non-oil export revenue in 2023 came from shipments sent to the United States. Most of Mexico’s export income comes from manufactured goods including cars, computers and machinery, but it is also a significant exporter of oil and agricultural products.
With regard to imports, the latest U.S. data showed that Mexico purchased U.S products worth $323.2 billion last year, a 0.3% decline compared to 2022.
Mexico thus had a trade surplus of almost $152.4 billion with the United States in 2023, up from $130.4 billion in 2022.
Trade between the two countries is facilitated by the United States-Mexico-Canada Agreement, or USMCA, which superseded NAFTA in 2020.
With reports from El Financiero
