Annual US imports of goods from Mexico surpassed those from China last year for the first time in two decades, according to newly released federal data.
Department of Commerce trade data released on Wednesday showed imports from Mexico rose modestly in 2023, to $476 billion, while Chinese imports slumped 20 percent on the year, to $427 billion.
Imports from Canada, America’s third-biggest trade partner, were close behind China, totaling $421 billion for the year.
After years of pandemic-related supply chain disruptions, simmering trade disputes, and political tensions between DC and Beijing, American consumers and businesses appear to be increasingly turning to alternative trading partners.
It’s a reversal of a 20-year trend that had seen China firmly ensconced as the largest source of US imports, producing everything from clothes and toys to electronics for American consumers.
Annual US imports of goods from Mexico surpassed those from China last year for the first time in two decades, according to newly released federal data
Post-pandemic shifts in US consumer spending — away from goods such as furniture and electronics, in favor of services such as travel and entertainment — has also been a factor in blunting demand for Chinese imports.
The decline in Chinese imports also comes as Washington has been pursuing an approach it calls ‘friendshoring.’
The move involves diversifying US supply chains across allies and partners, amid heightened concern about competition with China and national security tensions between the world’s two largest economies.
For all of the 80s and 90s, Canada was the top source of US goods imports by a wide margin, followed by Mexico and then China.
China first overtook Mexico in 2003, and then dueled with Canada for the top spot starting in 2007, pulling away into a clear lead following the Great Recession.
The US trade deficit with China has been a political focus during the trade war between both countries under former president Donald Trump’s administration, which imposed tariffs on Chinese goods.
The Biden administration has generally maintained the trade levies, though with a dialed-down rhetoric.
Last year, the overall US goods and services trade deficit, which is defined as exports minus imports, shrank considerably to $773.4 billion, from $951.2 billion in 2022.
Imports dropped, due partly to a pullback in consumer spending on big-ticket items amid rising interest rates and economic uncertainty.
Containers are seen at the Port of Long Beach in a file photo. Last year, the overall US goods and services trade deficit, which is defined as exports minus imports, shrank considerably
But US exports also increased by $35 billion, or 1.2 percent, thanks to increases in the travel, financial services, transport and information sectors.
In 2022, the country saw the biggest deficit in government data dating back to 1960.
Surprisingly resilient consumption last year has helped to support the US economy, but analysts expect higher interest rates to slow consumer spending and add pressure on imports.
In December, the deficit grew slightly from November to $62.2 billion, the new data showed.
This was up from November’s revised $61.9 billion level.
With imports and exports both growing in the final month last year, analysts considered the report an encouraging sign for global trade.
‘The trade deficit in real terms contributed positively to growth in the quarter,’ said Matthew Martin, US economist at Oxford Economics.
He added that ‘exports continue to fare well and will benefit from a weaker dollar as the cost of US goods becomes relatively cheaper abroad,’ expecting net trade to be a positive contributor to GDP growth in early 2024 too.
But Rubeela Farooqi, chief US economist at High Frequency Economics, said in a note that ‘the outlook for trade flows going forward is likely one of moderation.’
This is due to ‘expectations of slower demand and growth going forward, both domestically and abroad,’ she said.