Mexico overtakes China to become the largest exporter to the US According to the US Department of Commerce, the value of US imports from Mexico in 2023 reached $475 billion, and the value of imports from China amounted to $427 billion. Imports from Mexico increased by 5% from the previous year, while imports from China decreased by 20%. According to USTR, the US trade deficit in goods and services with Mexico was $131.1 billion in 2022.
Exporters are widening their bets in the face of hostile U.S. regulators and unreliable China policy.
Many of Mexico’s exports come from Chinese companies. Facing suspicions about U.S. bureaucracy, many Chinese companies are increasing investment and parts exports to Mexico to rebuild their brands.
Globalization is not over, but investors are diversifying their risks. China’s unpredictable behavior in recent years has been a wake-up call for foreign investors. Although they are not moving back domestically, they are working hard to diversify their manufacturing footprint to reduce the risks associated with concentration on supplier networks.
The international system of trade and investment is being readjusted as companies grow wary of China-related risks, and funds focused on China see the window for an IPO as impossibly narrow. The news that Mexico’s exports to the U.S. market in 2023 would exceed China’s was a harbinger of this. While China remains an important manufacturing hub, companies are wary of overexposure to China and are accelerating investment elsewhere. Beneficiaries also include Mexico and Vietnam.
Political caution has prompted Chinese companies as well as international companies to diversify, ramping up manufacturing in Southeast Asia and Mexico. Many Chinese companies go to great lengths to look like the United States, whether it’s to attract American investors, avoid sanctions, or circumvent trade rules of origin that make it difficult for Chinese companies to export to the United States. ing.
There are two different paths for Chinese companies to escape from the mainland. 1) the deception of rebranding Chinese products and manufacturers through third countries to avoid sanctions and taxes, and 2) the full-scale transfer of manufacturing capacity. Of course, there are all variations in between.
Excessive state control over investment capital and strong top-down directives regarding technology, industry focus, and research and development priorities generally drive the targeted sectors of the Chinese economy. This has enabled rapid capacity development in key areas such as low-end semiconductors, solar panels, EVs, bulk vitamins, and steel. The result will inevitably be significant overcapacity, culling, and regional losses, all of which will lead to the destruction of global market value.
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