The headlines this week were read with some astonishment: Mexico surpassed China as the main exporter to the United States.
According to official data, published on Wednesday, the Latin American country became the most important trading partner of the power, being the country from which the United States bought the most goods and services in 2023. The reasons, however, have less to do with Mexico and more with the geopolitical tensions of the moment.
The US wants to stop buying from China and Mexico is fighting for that slice of the pie.
In 2023, US purchases of Chinese products reached 427.2 billion dollars, a decline of 20% compared to 2022. In contrast, Mexican products added a value of 475.6 billion, with an increase of 4.6% compared to the year former.
This was enough to reverse the order that prevailed for the last 21 years in which China exported more to the United States than Mexico.
The change, in turn, is the result of a trend that has been going on for years, motivated by the growing rivalry, increasingly harsh, between China and the United States. A rivalry that has maintained strong tariffs between both since 2018 and that has led Washington to gradually diversify its sources of supply, to reduce its purchases from the Asian giant and increase them among countries considered more ideologically related.
Added to this gradual process are the logistical consequences of the Covid pandemic and the bottlenecks it generated in global supply chains.
The share of Chinese products in total US imports also fell: they stood at 13.9% in 2023, the lowest level since 2004. In 2022, they had reached 16.3%.
The trend could continue, even more marked, in the future: President Joe Biden's Administration is considering new increases in tariffs on Chinese products such as electric vehicles, equipment for obtaining solar energy and less advanced semiconductors.
The final decision is expected to be made sometime during the first half of this year.
Since China's entry into the World Trade Organization in 2002, the United States had gradually increased its imports from the Asian country, which very quickly became the “factory of the world” in those years.
The relationship was very convenient for both: American consumers saw the cost of the products they bought, from doors to T-shirts, drop visibly.
And exports fueled prodigious economic growth in the Central Empire, which for years exceeded double digits.
In the year of greatest sales, in 2017, Chinese products represented 21.6% of total US imports.
But the arrival of President Donald Trump to the White House in 2017 changed the tables.
After a first year of honeymoon between the American and the Chinese president, Xi Jinping, who took the real estate magnate on a visit to Beijing in which he was showered with entertainment - they even organized a dinner in the Forbidden City, a gesture reserved for very few - in 2018 a trade war broke out between the two.
Each country raised tariffs on the other's products.
The geopolitical and economic rivalry spread to the technology sector.
The era of the so-called “decoupling” began, the separation as much as possible of their supply chains and, above all, of their respective technological sectors.
The pandemic forced a pause in that trend.
In 2020, as the world locked down against the virus, and 2021, as the first vaccines began to be administered, Americans rushed to buy all kinds of products made in China to accommodate a new lifestyle, including teleworking.
Computers, office supplies, large television screens, toys, gym equipment.
In 2022, US imports from China were still on the rise due to problems in supply chains.
Once resolved, orders from companies were unleashed to replenish their stocks.
The 2023 data now points to a return to the Trump era trend.
Neither country has withdrawn those tariffs.
Distrust between the two governments is still present, despite small steps to stabilize the relationship.
Among them, the face-to-face meeting between the respective presidents, Joe Biden and Xi Jinping, outside San Francisco during the APEC summit in November last year.
And, since 2018, various companies have moved their production from China to other neighboring countries, such as Vietnam, or Mexico.
Something that can lead to undesired consequences.
The Federal Reserve has raised concerns about the impact that a reduction in trade between China and the United States could have on inflation in the North American country.
Some analysts point out that the change to production within the United States, or third countries, of goods that until now were bought cheaply from China may raise inflation by reducing the availability of the labor market.
In turn, Chinese companies are counterattacking by changing the way they do business with the United States. Some have chosen to move part of their production to Mexico, such as the Hisense company, which in 2022 began manufacturing refrigerators and other appliances for the market. North American in a 260 million dollar plant in Mexico.
An initiative similar to that of the automobile companies JAC Motors and SAIC Motor, which have launched or plan to build assembly plants in that country.
A similar trend is detected in Vietnam, according to the report
Geopolitics and the Geometry of Global Trade
, by the McKinsey Global Institute.
Various Chinese companies have invested in factories in their neighboring country.
“For some observers, the US shift toward imports from Vietnam represents a redirection of trade from China, with very little value added in Vietnam.
According to this version, China and the United States remain interconnected, but the supply chains have become longer and more opaque.”
Mexico is in direct competition with Vietnam, says Alberto Villarreal, director of Nepanoa, an office that facilitates the expansion of foreign companies in Latin America based in Chicago.
“Mexico is not going to supplant all those imports from China,” he assures, “and it is competing on a global level for those exports with other economies in Asia such as Vietnam, the Philippines, Singapore, which is a much more developed country, and with India.” .
Mexican entrepreneurs in the manufacturing, logistics and agriculture industries have been moving in coordination with some state governments, Villarreal shares.
“They are doing business tours, visits to different countries with different investors,” he says, “and those are the industries that are spearheading this for the United States-Mexico relationship.”
But Mexico is also in competition with the United States itself. Since the Barack Obama Administration, the White House has made efforts to return the manufacturing jobs that left during the globalization boom to strengthen employment and depend less on imports.
The data published on Wednesday shows it: imports totaled 3,826 million dollars, 142.7 million less than in 2022.
Mexico's natural advantages are obvious, but at the moment there is also the fact that, compared to emerging markets in Eastern Europe, for example, or in the Middle East, it offers much greater stability.
Although it is not free of friction with its northern neighbor.
The arrival of hundreds of thousands of undocumented people to the border with the United States, coming not only from Mexico but from the rest of Latin America, is a point of tension.
So is the trafficking of fentanyl that crosses the border from south to north and has become a major health problem.
“This election year in both countries has businessmen paying close attention,” says Villarreal.
“We are going to hear a lot about migration, we are going to hear the word fentanyl a lot and we must not forget that the free trade agreement is going to be updated in 2026. Businessmen and investors pay attention to this without forgetting that the geopolitical conflicts that "This is happening in the world, it positively impacts the relationship between Mexico and the United States."
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