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US-China Trade Shifts: Mexico and Asia Gain Ground

As US-China economic ties reconfigure, Mexico and Asian countries like Vietnam benefit from the changing trade dynamics.

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The United States and China, once the closest of trading partners, are experiencing a significant shift in their economic relationship. Trade data reveals a trend that suggests a potential ‘decoupling’, with Mexico and other Asian countries stepping into the space once dominated by China. This change comes amidst repeated themes of ‘decoupling’ and ‘derisking’ from China by the Biden administration and its political counterparts.

Caroline Freund, a trade expert at the University of California, notes a significant drop in China’s share of US imports – from 22% in 2017 to 16% currently. This decline returns China’s share to its 2007 level. While Chinese imports haven’t drastically decreased, trade with other partners, notably Mexico, has expanded more rapidly. The USMCA agreement has particularly spurred this increase in Mexican imports.

Vietnam and other Asian nations are also capitalizing on this redefined trade landscape. Former Mexican ambassador to Washington, Arturo Sarukhan, highlighted that the bulk of production relocation from China is now happening in countries like Taiwan, South Korea, India, and Vietnam, benefiting from their proximity to China.

Vietnam’s exports to the United States have skyrocketed, rising from $21 billion in 2012 to $136 billion in 2022. US Treasury Secretary Janet Yellen’s visit to Vietnam last summer emphasized the country’s role in US supply chains independent of China. However, it’s often difficult to trace the origin of products entering the United States, with many components still coming from China.

The intricate nature of global supply chains means that while direct imports from China may be declining, indirect imports via countries like Mexico and Vietnam are increasing. This complexity allows Chinese companies to circumvent trade restrictions. Henry Storey from Dragoman Global points out that Chinese exports are still strong, with growth especially noticeable in China’s central and western provinces since the imposition of Trump’s tariffs in 2018.

Chinese investment in Mexico is also on the rise, causing concern in Washington. Despite Mexico not being a major commodity exporter like other Latin American countries, Chinese investment there has seen a significant increase. This growing economic relationship led to an agreement during Yellen’s visit to Mexico City to establish a US-Mexican working group to scrutinize Chinese investments in Mexico, focusing on sectors deemed critical by the United States.

This shift in global trade patterns reflects the growing complexities of international economics and the strategic maneuvering of countries to adapt to these changes. The US, while distancing itself economically from China, is closely monitoring the growing influence of China in its neighboring countries.