Mexico has dramatically overtaken China as the world’s largest exporter of goods to the USA.
In 2023, the US imported $475.6bn of goods from Mexico compared to $427.2bn of goods from China. It’s the first time Mexico has exported more to the US than China for 20 years.
Figures from the US Government’s Bureau of Economic Analysis reveal a 20% decrease in American imports from China last year, compared to a 5% increase in imports from Mexico.
The numbers show new tariffs on trade from China first imposed by former President Trump, and retained by President Biden, are biting.
At the same time, the new United States-Mexico-Canada trade agreement (USMCA) has encouraged companies to move more of their supply chains to North America, further boosting Mexico’s economy.
The UK-North America international delivery specialist ParcelHero says that Mexico is fast becoming an important international market not only for the US but also the UK. UK-Mexico trade was worth £6.5bn ($8.12bn USD) in the four quarters to Q3 2023.
Britain exported £3.3bn of goods and services to Mexico last year (up 24.1% on 2022) and, in a neat symmetry, imported £3.3bn of goods and services (up 20.6%).
However, ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T., warns: ‘While former President Trump created the circumstances for the resurgence of Mexico’s economy, a second Trump presidency could see tightened border controls between the two countries. This would create new trade bottlenecks and unintentionally hand back the advantage to China.
‘Mexico is enjoying an economic renaissance with overall exports of $594.42bn (USD) in 2023, up 3.01%. In comparison, China’s exports globally were down 4.9%. While China’s worldwide exports still eclipse Mexico’s overall, the benefits of Mexico’s increased access to the US market are clear.
‘Mexico’s overall exports now considerably outstrip those of the UK (which exported $459.32bn of goods last year, according to the OECD, up 0.22% on 2022.) But Mexico also imported a huge $599.99bn (USD) of goods, which means there is considerable scope for UK exporters eyeing up this growing North American market.
‘To a large extent, Mexico’s economic success has come on the back of tariffs on China-US imports imposed by Trump, together with President Biden’s new restrictions on tech such as microchips.
‘Today, 25% tariffs are still applied to some $250bn-worth of Chinese-made goods and materials. At the same time, the USMCA – an agreement signed by Trump – pushes plans for a higher proportion of automobiles to be manufactured and sold among the three North American nations rather than imported from elsewhere. That’s helped Mexico’s resurgent auto industry considerably. Trump has also recently floated the idea of imposing a 60% flat tariff on all Chinese imports in a second Trump presidency, a move that would further bolster Mexico’s trading position.
‘However, it’s possible Mexico’s sustained economic growth could, ironically, be scuppered by the very man who helped create the circumstances for it to eclipse China in US trade. For his 2024 re-election bid, Trump has campaigned extensively on the message that he will “terminate every open border policy of the Biden administration”. There is also concern that Trump’s plan to further extend the physical border walls between Mexico and the USA will unwittingly damage trade.
‘A 2019 paper published in the journal International Organization found physical walls reduce trade between neighbouring countries by as much as 31%. The report’s authors say: “Walls also produce material consequences, reducing legal trade as well as illicit activity.”
‘It’s also possible that Trump may undo the terms of the USMCA agreement. Should he choose to repeal or adjust it, Mexico could face economic and trade risks. In recent interviews, the former president has raised the possibility of a universal 10% tariff on US imports, including Mexico and Canada.
‘According to the US economic research company Capital Economics, a 10% universal tariff could cut American imports of Mexican goods by 5% and ultimately lower Mexico’s GDP by 1.5% or more. It warns a large volume of goods cross the border multiple times before being assembled into final products. New tariffs could raise prices as much as 10% for some items.
‘Trade between Britain and Mexico could also be hit by US border restrictions and any new tit-for-tat general tariffs. However, while the UK’s sales to Mexico could near £4bn this year if unhindered, that figure is eclipsed by the value of the US market. The US was the largest of all UK export markets in 2023. The latest figures available, for the four quarters to September 2023, show UK exports of goods and services to the US were worth £193.1bn – that’s 21.9% of all UK exports.’
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