Mainland China, who took the throne as America’s number one trading partner from Canada in 2014, has been deposed by Mexico, according to new analysis.
The Federal Reserve Bank of Dallas stated in a July 11 article that during the first 4 months of 2023, Mexico is now the top trading partner with the United States, exchanging $263 billion worth of goods.
The U.S. exported $107 billion of goods and imported $157 billion from Mexico.
“Mexico’s emergence followed fractious U.S. relations with China,” the Dallas Fed wrote. “The dynamic changed in 2018 when the U.S. imposed tariffs on China’s goods and with subsequent pandemic-era supply-chain disruptions that altered international trade and investment flows worldwide.”
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Those tariffs were imposed by the Donald Trump administration during the former President’s initiative to be harder on the Chinese Communist Party.
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Although Joe Biden unwound an extensive array of Trump’s policies within his first days and months of office, Dallas Fed data says that today, the Trump-era tariffs almost entirely remain.
More than two-thirds of the Mainland’s imports remain subject to the tariffs, amounting to over $335 billion worth of goods.
April statistics from the Peterson Institute for International Economics showed that U.S. tariffs on Chinese exports are more than 19 percent, a highly significant figure compared to the average 3 percent charged to the rest of the world and the 9 percent average in the World Trade Organization.
Data showed the trade figure was almost mirrored by the volume of manufactured goods sent from Mexico to America, accounting for $234.2 billion in total.
“Mexico–U.S. trade during the first four months of 2023 represented 15.4 percent of all the goods exported and imported by the U.S.; the Canada–U.S. share followed at 15.2 percent and then the China–U.S. share at 12.0 percent,” the Fed stated.
These figures were notable in that the China-U.S. portion skyrocketed sharply to nearly 20 percent when the Coronavirus Disease 2019 (COVID-19) pandemic began, with Canada and Mexico falling to 12 percent.
In the time following the pandemic, that situation had sharply reversed into the figures seen today. The article attributes the bullwhip effect to “supply-chain disruptions, many involving shipping and manufacturing originating in China.”
The Dallas Fed says the uptick in Mexican manufacturing imports is attributable to “nearshoring,” a phenomenon that can be considered something of an inversion to “offshoring.”
While the peso has enjoyed significant gains against the U.S. dollar, returning to only 16.8:1 since hitting an all time high of almost 26:1 during the COVID economic crisis, the exchange rate allows American importers to enjoy much of the benefits of offshoring and far less of the problems of supply chain and shipping crises.
“While data on recent nearshoring is thin and evidence of it is largely anecdotal, increased protectionism and related industrial policy are consistent with less global trade, more regional trade, and nearshoring and reshoring (returning production to the home country),” the article reads.
This particular aspect is quite significant in analyzing whether or not the notion Mainland China imports have truly been reduced in favor of Mexico holds water.
In September 2022, Chinese companies were reportedly putting down roots in Mexico in order to evade U.S. import tariffs.
One particular Bloomberg article we viewed showed that a generational Monterrey cattle rancher had converted the family business into the Hofusan Industrial Park where 11 different factories and warehouses owned by 10 Mainland companies.
Managers of the companies at Hofusan were said by Bloomberg to, “Predict there will eventually be 15,000 people working at Hofusan—about 10% of whom would be Chinese managers—and plan to build restaurants to cater to them as well as homes to house them.”
The trend has not abated. A February article by The New York Times titled “Why Chinese Companies are Investing Billions In Mexico” chronicled the story of a Chinese furniture producer said to be one of the largest in China building a $300 million factory in Northern Mexico in an attempt to preserve its business model as geopolitical tensions between the Xi Jinping administration and Washington have increased.
“Tracing a path forged by Japanese and South Korean companies, Chinese firms are establishing factories that allow them to label their goods ‘Made in Mexico,’ then trucking their products into the United States duty-free,” the Times wrote.
The Times added that the governor of the Northern state of Nuevo Leon made the spotlight at the 2023 Davos event of the globalist policy bloc World Economic Forum in a campaign for new international clients who want to set up shop for America’s Southern border.
In 2021, China’s companies were attributed with 30 percent of foreign investment in the state, authors added.
The potential mixing of numbers from the China column to the Mexico column in this matter is not addressed in the Dallas Fed’s analysis.