The Trade Tangle Between Mexico, the United States, and China
The relationship between Mexico and China is quite complex. With the ongoing trade war between the United States and the Chinese giant, Mexico finds itself in a delicate situation. Its primary trading partner is the United States, and China comes in second, but the dynamics are different: with the northern neighbor, Mexico sells more than it buys, while the opposite is true with China. Additionally, the United States is closely monitoring imports from China, accusing Mexico of acting as a sort of gateway for that country.
Mexico has positioned itself as the largest exporter to the United States. Now, let's take a look at Mexico's purchases from China: Even though Mexico makes profits with the U.S., its relationship with China results in losses. At the same time, U.S. purchases from China are plummeting. So what does Mexico sell to the U.S.?
China's influence in Mexico will be a key issue during the review of the USMCA that will take place in 2026, making it crucial for the country to define its trade strategy and ensure that most of what it imports from China is marketed internally, says Gabriela Siller, Director of Economic and Financial Analysis at Banco Base. While nearshoring can be beneficial for Mexico, it also means that Asian producers facing U.S. tariffs and restrictions could establish operations here and benefit from the USMCA, according to an analysis by Alfredo Coutino, Director for Latin America at Moody's Analytics. In 2023, Mexico solidified its position as the main supplier of products to the United States, which accounts for more than 80% of Mexican exports. Meanwhile, China ranks second as Mexico's trade partner, representing 20% of its imports. While the trade balance with the U.S. shows a surplus, Mexico faces a deficit with China. Since 2018, the United States has been trying to reduce its dependence on China, initiating a trade war. The automotive sector is the main driver of Mexican exports to the United States.
It is clear that the Mexican economy is at a crossroads. As the world changes and trade dynamics are redefined, it's essential for Mexico to optimize its trade relationships and adapt its strategies to maximize benefits and minimize risks. Diversifying its trading partners and improving domestic production are key to strengthening its economy in the long run.
