Mexico Becomes the Number One Exporter to U.S.

ON 02/12/2024 AT 04 : 20 AM

Mexico overtook China last year to become America’s top source of imported goods and services in 2023.

It was the first time Mexico took the number one import spot since 2002.

It achieved that distinction by selling $475.6 billion of products last year to the United States, an amount that worked out to 14.6% of America’s grand total of $3.26 trillion of imports coming from all countries.

It hit that percentage high not via a surge of exports to the U.S. in 2023, as many might have guessed. In fact, last year’s sales for Mexico to the U.S. were up by only 4.6% from what they were in 2022.

The actual reason Mexico made it to the top spot was instead primarily because China saw its net sales to the U.S. plummet by 20% from 2022 to 2023, leaving that country with just 13.9% of the total, its lowest percentage market share of America’s imports since 2004. Its total exports to the U.S. last year were just $427.2 billion.

Canada, the number three exporter to the U.S. in 2023, came in slightly behind China. It sold $421.1 billion in goods and services to the U.S. Its total exports to America for the year also represented a decline of 3.6% compared to 2022’s $436.6 billion.

With Mexico being the only country of the top three to see sales rise and the other two declining, it easily took the top rank for 2023.

This is all part of a seismic shift in America’s international trade picture which has been taking place for years.

Part of that shift comes from the maturing of the trade pact between Canada, the United States, and Mexico, which provides far more favorable tariffs for shipments made between the three countries, as defined in the USMCA (U.S.-Mexico-Canada) trade agreement which the Trump team rammed into place during the last presidential administration.

A second part of that comes from a deliberate push to slash some of China’s dominance over a wide range of imports into the U.S. by both Trump and Biden.

Trump executed his changes principally by imposing high import duties on goods which his administration asserted were being dumped on the U.S. at such low prices that it made it impossible to compete. Raising the duties meant U.S. purchasers both in the consumer ranks and in corporate America would start to seek other locations for those items. The ideal choice from Washington’s perspective would have been to buy more from within the U.S., something which has happened. But it also meant that Mexico and Canada now had an opportunity to replace China as a supplier, thanks both to the increased import duties for Chinese goods and the decreased tariffs over an even wider range of goods coming from both of those countries.

Joe Biden implemented his piece of the strategy by incentivizing growth in strategic business segments which had suffered as China’s manufacturing prowess and pricing became dominant over the first two decades of the 21st century. From solar energy to advanced semiconductor chip manufacturing to batteries for electric vehicles, the Biden regime orchestrated its own shift away from China as a direct source of many goods. It too has helped slow the pace of imports from China, though this is only the beginning of what eventually might happen as a result.

Exports from China worldwide plummeted in 2023. That happened largely because of the dictatorship's deeply destructive lockdowns in response to the SARS-CoV-2 virus it weaponized and unleashed on the world, and the ineffectiveness of its Sinovax vaccine. The lockdowns not only shuttered factories but also demoralized and traumatized workers. On top of that, the massive real estate frauds that resulted in the construction of thousands of ghost cities and the looting of many trillions of Yuan, has shook the Chinese economy and its dictatorship to its core. 

When China shut down its manufacturing it forced corporate buyers to move their own outsourcing to suppliers in countries such as Vietnam and Indonesia in Asia, and Poland and Romania in eastern Europe. 

Related to all the changes in Mexico is something called “reshoring”. In the current case this relates predominantly to a national growth strategy which only began in earnest after Mexican President Andrés Manuel López Obrador took office in December 2018. López Obrador, also known as AMLO, has made multiple radical changes to the economic structure of his country via a variety of means. An early example came as he aggressively addressed theft and pilfering in the country’s lucrative gas and oil industry early in his term, resulting in rising profits while not necessarily eliminating the corruption that was at the root of that part of his economic problem. A second push came in reawakening the country’s valuable tourist industry in the areas of Yucatán, Campeche, and Quintana Roo, where the ruins of the ancient Mayan civilization have always drawn visitors from around the world, with the U.S. being the largest by percentage of visitors. The "El Tren Maya" (the Maya Train) project, which is about to make often inaccessible regions of those three states now easily visited, is expected to bring major revenues, jobs and crime into the area.

A third aspect of the Mexican president’s early business initiatives in Mexico was pouring money into new housing  and construction projects for business growth from multiple foreign companies in the corridor just south of the U.S. border. Companies from the United States, Europe, Japan, and China are all working aggressively to expand establishments they already have in place in that area while also setting up new plants. The result has been a slow rise in the ability to do business there with the U.S., and contributing to strong steady growth in exports northwards.

A fourth pillar of AMLO’s drive for economic growth is on its way in the Isthmus of Tehuantepec industrial development project. This initiative, straddling Coatzacoalcos, Veracruz, on the north to Santa Cruz, Oaxaca, to the south, will include ten major new industrial parts, a major new freight train line running 300 kilometers (186 mile) from north to south, along with a new gas pipeline for the area. With funding of up to $1.8 billion provided as seed money for the various parts of this ambitious project by the Inter-American Development Bank, this, more than any of the Mexican president’s, an excellent example of how reshoring can work. By setting up what amounts to some of the most modern industrial sites in all of Mexico, while also providing tax incentives to companies from all over the world to build there, once the Isthmus project is fully operational López Obrador will have transformed yet another area where jobs were far from plentiful into a highly profitable manufacturing and engineering hub serving not just Canada and the U.S. but also throughout the Americas.

The Isthmus project will also likely further transform what happens to China as a supplier of goods to the U.S. China is already on the list of most aggressive bidders to get access to some of this new industrial space, so once it is established there it is likely China’s net exports directly into the U.S. will drop even further. This will also help prop up Mexico’s total exports to the U.S. as well, surprisingly to many because now China will be outsourcing products of interest to American consumers and companies to their Mexican subsidiaries.

The bottom line for Mexico is a promising one. Between its aggressive reshoring approach and other moves by President AMLO, Mexico has set a course which will change the country’s economic future to the positive for many years to come. It is expected that much of the country’s investments will begin to bear fruit in earnest this year, likely increasing net exports to the U.S. by a double-digit level for 2024.