The Biggest US Trading Partner Is No Longer China!

The US-China trade war is rewiring global trade. As the US seeks to reduce its reliance on China and other geopolitical rivals and start sourcing imports from closer to home, Mexico is starting to shine. Mexico has just overtaken China as the biggest supplier of goods to the United States.

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[thomaszhang]

But if you look at the year by year graph of Mexico’s import from China… it’s almost as if Chinese goods were repackaged in Mexico before heading off to the intended buyer.

[Sleepy.Time.]

growing up on a ranch in California we had many Mexicans work for us over the years and they are honest, hardworking reliable people from my experience

[bunk]

Once again you provide insights into current issues that I have not seen elsewhere. I have read or watch alot about Mexico economy benefiting from near shoring, but you are the first one to point out potential problems such as reliable electricity, water availability, and President Obrador. So once again, a thumbs up and thank you from me.

[PhiloSurfer]

Look behind the trade numbers. China's trade with US has indeed come down; but China's trade with Vietnam and Mexico has shot up correspondingly. What is happening is that Vietnam and Mexico are acting as middlemen - importing huge amount from China, slapped on the "Made in Vietnam" and "Made in Mexico" labels, and re-export them to the US. So, the US ends up with Chinese products that are relabelled and pays a premium in the process. Clever.

[coopergreen]

As a American who loves Mexico I would love nothing more for us to be trading partners

[tntbomb]

Mexico has been the USA's biggest trade partner for a while now. We just haven't been counting illegitimate businesses 😂

[Jkl]

US is buying lots more from ASEAN (South East Asia countries like Vietnam and Indonesia etc). Many of those goods are actually by Chinese manufacturers who have set up transshipment outposts there. That's why trade between ASEAN and China has soared.

[henriooi]

Super informative and entertaining! I've been following you for a while now and really like this simple no frills way of presenting the information and your dry humour 😂 Thanks for all your hardwork

[danguee]

Patrick. I keep forgetting about you. But every once in a while I'm reminded: you are one of the most astute macroeconomic analysts on YT - if not the most. Virtually no one is able to add "context" to data or information like you do. Thank you....

[frostfox]

“Essential industries like crypto mining”. I love it

[twisted_void]

Hope these changes help Mexico to overcome their problems and offer their people a much better life.

[danmur]

One thing these videos rarely mention--Mexico already manufactures a lot and most of it is not from Chinese companies but European (particularly German and French), Japanese, and American companies. European and American companies have invested in Mexican manufacturing for over 70 years. At first to manufacture for the domestic market. But after the 1980s, and especially after NAFTA, more investment was made to manufacture for exporting.
And it hasn't looked back.
Mexico is the ONLY country in Latin America whose GDP is primarily composed of manufacturing instead of commodities. Even over the larger economy of Brazil. So it's not just repackaged products from China--Chinese companies in Mexico are less than 10% of multinational presence manufacturing in Mexico.
About water--the city he cited suffering drought, the local government s now building an aqueduct from a large nearby lake that will ensure stable supply.

Mexico is also the country in Latin America with the largest number of public works projects under construction with over 200 nationally. So it's been improving port, road, railroad, and airport infrastructure. The top half of Mexico already has a lot of infrastructure in terms of interstate highways. The south less, but it's improved. In fact comparing the Mexican port he cited to Los Angeles/Long Beach is a bit unfair, as Los Angeles/Long Beach is not just the largest and busiest port complex in the U.S., but the largest and busiest in the western hemisphere including the rest of North America and Europe (yes busier than Rotterdam). For comparison it's the largest and busiest port outside of East Asia which has the busiest ports in the world.

Mexico also already has the largest number of engineering graduates in the Americas. Mexico is simply well positioned to become a larger exporter given the number of free trade agreements it has.
And it's large young labor force still guarantees large productivity increases for years. Given its proximity to the U.S. it's simply a given Mexico will further manufacture for the U.S. and other countries.
The 2023 figures for foreign direct investment to Mexico are not finalized but it already looks like it is record setting given the announcement of so many companies opening new facilities there. Keep in mind Mexico already manufactures more vehicles than the UK, France, and Spain (and EV manufacturing coming online in 2023). And may have already surpassed Italy as well as perhaps even Germany in 2023. In the last 20 years Mexico has become about a top 5 vehicle manufacturer globally. It also is a top electronics manufacturer and increasingly aerospace and biotech.

Its economy has been doing better than most around the world (its currency the peso too). In fact of the OECD member of developed and industrialized countries, it had one of the highest GDP growth rates in 2022, 2023, and likely 2024. It's fluctuated between 3-5%. In the last quarter of 2022 it grew at near the same rate as China--China.
In 2023, while some major G7 developed countries (particularly in Europe) have seen their economies shrinking, Mexico will be among the top OECD and G20 member countries to have seen the most GDP growth. 2024 looks to be the same.

[Thatdavemarsh]

Maybe it’s finance vs engineering but when Mexican share of exports goes from 12 to 15 points, that’s a 25% increase. Not 3%. That’s a huge change for MX

Love your content and your jacket.

[tomfortner]

You're absolutely brilliant Patrick. I love the spot on insights you deliver, post after post.

[susanavenir]

"Mexico has the strongest performing currency so far this year." AWESOME. Or as we should be saying, ASOMBROSO.

[thedawapenjor]

If this trend continues this might be the start of something bigger changes than anyone expects

[dinosaurdude]

Patrick is one of the best news source, and backs it up with detailed explanations.

[dancahill]

That is tremendous news. A stronger, richer Mexico would be great news for America.

[matthewgladback]

There's another important connection between water supply and electricity. Most methods of power generation use a lot of fresh water. It's one of the major overall uses of fresh water, usually second behind only agriculture (albeit a rather distant second.)

[Ifraneljadida]

Loving the reshoring of industries to the Americas. We truly can just be all on our own in this hemisphere - and get those Mexicanos some agua !