An analysis by Descartes Systems Group, a Canadian logistics technology provider, reveals a strong correlation between Mexico’s escalating exports to the U.S. and a significant surge in Chinese exports to Mexico. This intricate trade dynamic stems from a series of factors, including trade tariffs imposed by the Trump Administration on Chinese goods in 2018 and subsequent disruptions caused by the global pandemic. These events prompted companies to shift their manufacturing and sourcing activities from China to alternative countries like Mexico.
Descartes’ study, titled “Growth in Mexico’s Exports to U.S. and the Rising Importance of the Chinese Goods Supporting It,” showcases a notable trend: while Mexican exports to the U.S. expanded by 54% over a seven-year span, Chinese exports to Mexico soared by an impressive 134% during the same period. This growth suggests that China continued its manufacturing activities but redirected its goods to countries, particularly Mexico, with more favorable trade relationships with the U.S.
This interdependent trade relationship highlights how Chinese goods are being incorporated into Mexican manufacturing processes to create products destined for the U.S. market. This development isn’t solely attributed to Chinese companies; it also involves multinational corporations utilizing Mexico as a cost-effective manufacturing base for U.S.-bound goods. Overall, the analysis underscores the intricate and evolving dynamics of international trade and manufacturing, exemplified by major companies like HP’s decision to move laptop production from China to Thailand and Mexico.
Source: “Despite U.S. trade tariffs and pandemic hurdles, China is still the ‘world’s factory'” by DC Velocity