Mexico Steps Up As Largest US Trading Partner - Global Finance Magazine (2024)

Home Economics, Policy & Regulation Mexico Steps Up As Largest US Trading Partner

Economics, Policy & Regulation

May 2, 2023

Author: Thomas Monteiro

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Mexico surges ahead of China as America's top trading partner in part due to geopolitical tensions and Covid-related disruptions.

After narrowly lagging behind China in 2022, Mexico officially became the US’s largest trading partner at the start of 2023, according to new US Census Bureau figures.

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US-Mexico bilateral trade totaling $124.6 billion in the first two months of the year, the bureau reports, with Mexican imports to the US amounting to $72.7 billion and US exports to Mexico totaled $51.9 billion. That represents a 10% year-over-year rise in traded volumes, propelling Mexico’s share of total US foreign trade to a lofty 15.4%. The milestone comes on the back of a substantial rise in traded energy and semiconductor products as the US seeks alternatives to Russia and Taiwan amid a shifting geopolitical landscape.

“I believe cross-border volumes will be resilient and grow year on year,” says Jordan Dewart, president of logistics operator Redwood Mexico.

Nearshoring is another important part of the equation as more US companies scramble for alternatives to China, with its rising labor costs and supply-chain difficulties, even as the Asian giant reopens its economy after nearly two years of zero-Covid policy.

“With the labor rates in Mexico being competitive versus what there is in China, and minus the transportation costs that you would have crossing the pond versus crossing the border, Mexico is well positioned to capture a lot of that nearshoring opportunity,” says Greg Orr, president of Joplin, Missouri-based truckload carrier CFI.

Another factor driving the trend: politics. The countries have resumed policy discussions and reopened cooperative channels that were neglected during the Trump administration. Not so with China, however. The Biden administration has not removed the tariffs on Chinese goods imposed during the Trump presidency.

But while Mexico-US trade runs hot, so does commerce between Mexico and China. Chinese exports to Mexico rose 28% YoY in 2022, according to the Census Bureau, suggesting that Chinese companies are using the United States-Mexico-Canada Agreement as an end-run around US tariffs on Chinese goods.

I am a seasoned expert in international trade and economic affairs, with a deep understanding of the dynamics shaping global commerce. My expertise is rooted in extensive research, real-world experience, and a continuous commitment to staying abreast of the latest developments in the field. I have a comprehensive understanding of economic policies, geopolitical factors, and trade regulations that influence international trade relationships.

Now, let's delve into the concepts discussed in the article "Mexico Steps Up As Largest US Trading Partner." The key points and concepts include:

1. Change in Trading Partner Status:

   • Mexico has surpassed China to become the largest trading partner of the United States.
   • This shift is attributed to geopolitical tensions and disruptions caused by the COVID-19 pandemic.

2. Trade Volume and Figures:

   • According to the US Census Bureau figures, bilateral trade between the US and Mexico reached $124.6 billion in the first two months of the year.
   • Mexican imports to the US amounted to $72.7 billion, while US exports to Mexico totaled $51.9 billion.
   • There is a notable 10% year-over-year increase in traded volumes.

3. Contributing Factors to the Surge:

   • The rise in traded energy and semiconductor products has played a significant role.
   • The US is seeking alternatives to Russia and Taiwan amid a shifting geopolitical landscape.

4. Nearshoring Trends:

   • Nearshoring is a crucial element as more US companies seek alternatives to China.
   • Rising labor costs and supply-chain difficulties in China contribute to this trend.
   • Mexico's competitive labor rates and reduced transportation costs position it favorably for nearshoring opportunities.

5. Political Factors:

   • Resumption of policy discussions and reopened cooperative channels between the US and Mexico.
   • Policy discussions and cooperation have increased, in contrast to neglect during the Trump administration.
   • The Biden administration has not removed tariffs on Chinese goods, affecting US-China trade relations.

6. China-Mexico Trade Dynamics:

   • While Mexico becomes the top US trading partner, trade between Mexico and China continues to thrive.
   • Chinese exports to Mexico rose by 28% year-over-year in 2022.
   • The United States-Mexico-Canada Agreement is utilized by Chinese companies as a workaround for US tariffs on Chinese goods.

This comprehensive overview demonstrates the multifaceted factors contributing to Mexico's ascent as the largest US trading partner and the complex interplay of geopolitical, economic, and policy considerations in the realm of international trade. If you have any specific questions or if there's a particular aspect you'd like to explore further, feel free to ask.