ChainMail | Mexico’s Momentum

Look who surpassed China as the top U.S. trading partner

ChainMail | Mexico’s Momentum

Maybe you missed this statistical milestone (I did until recently). Mexico has surpassed China and Canada to become the top foreign supplier of goods to the United States.

As of July, Mexico eclipsed China to claim the top spot with 15% of U.S. imports, the largest monthly share. That’s compared to China’s 14.6%, according to a Bloomberg analysis of U.S. Census Bureau data.

The Dallas Federal Reserve says Mexico early this year slipped past Canada to become the top U.S. trading overall partner, with 15.4% of goods exported and imported by the U.S., followed by Canada at 15.2%, and China at 12%.

The shift is an indicator of the American supply chain’s mistrust in China as a factory partner, and the growing interest in making goods and buying them from anywhere else, especially nearby Mexico. China was the top trading partner from 2012 until the Trump administration began levying tariffs on Chinese-made goods in 2018 as part of a trade conflict.

Misgivings about China’s authoritarian government have deepened since then.

This wake-up call was joined by concerns raised by the pandemic, which exposed the risk of relying too heavily on distant suppliers. Companies don’t ever want to repeat the calamity of having shipments bottlenecked at sea. They want to diversify their manufacturing base, the closer to their biggest markets the better.

Enter booming Mexico, now with an economy growing at about 3.4% on an annual basis. “This is the seventh consecutive quarter the Mexican economy has expanded, and growth is generally surprising to the upside,” the Dallas Fed said in October.

Mexico has its problems. Power and water shortages hinder business activity. Corruption and weak government control render large areas of the country essentially lawless. This creates security risks that must be factored into every assembly line and transaction.

To do business abroad successfully, U.S. companies need competent, trustworthy governments as partners. China is failing that test. Mexico has the chance to be better.

Read the complete Issue 47 of ChainMail here.

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