Mexico has overtaken China as America’s top trading partner, proving that the global economy is changing

US President Joe Biden and Mexican President Andres Manuel Lopez Obrador shake hands during a welcome ceremony at the 2023 North American Leaders Summit. Hector Vivas/Getty Images

• US-Mexico trade hit $263 billion in the first four months of this year.
• Mexico has thus supplanted China and Canada as its most important trading partner since the beginning of the pandemic.
• China was the key partner for much of the 2010s and again at the start of the pandemic.

Meet America’s new, old best friend in the global economy.

Mexico has reasserted its position as America’s top trading partner, with $263 billion worth of goods shipped between the two countries in the first four months of 2023, according to a new post by Luis Torres of the Federal Reserve Bank of Dallas strengthened. Trade with Mexico The country accounted for 15.4% of all goods exported and imported by the US, just more than all of America’s trade with Canada (15.2%) and China (12.0%).

Even as the world is past the peak of the pandemic, Mexico’s ability to snatch the top spot from China – which had become further integrated into the US economy over the past two decades – is a clear sign of how economic chaos is unfolding in 2020 will continue to shape the global economy in the years to come.

According to the Dallas Fed, the groundwork for this shift was already being laid before the pandemic — with former President Donald Trump’s tariffs on some Chinese goods and the signing of the US-Canada-Mexico trade deal, a small update to the nearly three-decade long one Crisis. old NAFTA deal. But Torres notes that the changes also point to an accelerated shift toward nearshoring, a practice in which countries seek to move supply chains for essential commodities to countries that are both physically and politically close to each other.

“While data on recent nearshoring is sparse and the evidence is largely anecdotal, rising protectionism and associated industrial policies are consistent with less global trade, more regional trade, and nearshoring and reshoring (returning production home)” wrote Torres.

Nearshoring has increased during the pandemic as the cost of shipping products across the Pacific has risen and consumers are demanding faster delivery times – the latter we call the “Amazon Prime Effect”. Peter S. Goodman of The New York Times also wrote earlier this year that amid rising political tensions between the US and China, companies like Walmart are increasingly looking for ways to meet their needs closer to home.

“It’s not about deglobalization,” Michael Burns, a managing partner at Murray Hill Group, a supply chain-focused investment firm, told Goodman. “It’s the next level of globalization that focuses on regional networks.”

Trucks loaded with shipping containers queue as they are flagged for a secondary inspection at the port of Manzanillo, Mexico. Salwan Georges/The Washington Post via Getty Images

In Shannon O’Neil’s new book, The Globalization Myth: Why Regions Matter, she advocates the idea of ​​regionalization rather than globalization, arguing that it would help American workers keep manufacturing closer to home. In his review of O’Neil’s book, NPR’s Greg Rosalsky summarized the argument:

“O’Neil writes that the average import from Mexico is 40% US made, which means 40% of the parts that go into the final product are still US made. The average import from Canada is now 25% manufactured.” in the US. “As for a product coming from China? Only 4% of that was made in the US,” she writes.”

Still, President Joe Biden has sought to mend US-China relations in recent months after divisions have widened in recent years, including the downing of a Chinese spy balloon in February. Foreign Minister Antony Blinken met with Chinese President Xi Jinping in June and Finance Minister Janet Yellen recently made a four-day trip to China.

Blinken and Xi pledged to stabilize China-US ties. Meanwhile, Yellen voiced her concerns about “unfair economic practices” but hoped the two sides could work more closely together, noting: “The world is big enough for both of our countries to thrive.”

With things in flux, especially with China, one thing is clear for now: Trade between Mexico and the United States appears to be as strong as ever and should continue to grow.

WATCH NOW: Insider Inc.’s Popular Videos

Loading…