China was overtaken by Mexico in exports to the United States, China made up 14.2% of US Exports last quarter while Mexico made up 15%.
How did this happen?
The first tariffs against China were imposed in 2018 by Trump, and even though Biden lightened some of these tariffs, he has imposed restrictions on investment in and exports to China, especially for strategic goods. I think Biden-era protectionism is justifiable as most Biden-era tariffs were imposed after China backed Russia in the war of aggression they started in early 2022. These tariffs reduced China's exports, as Chinese goods became more expensive. The COVID-19 crisis also encouraged firms to diversify their production friends and led to near-shoring and ally-shoring or friend-shoring. These tariffs are sometimes bypassed by foreign firms re-labeling Chinese products, and the US does not seem to have a way of stopping this as of now.
What does this mean for Mexico?
This means that Mexico has a great opportunity in its hands to be the next US production powerhouse, but it has some great hurdles standing in its way. I would say, President Almo, who reduced infrastructure spending and the wages of government officials is the biggest. He is very openly against multinationals and wants Mexico to return to its oil-fueled economy of the 1970s. Also, the infrastructure of Mexico is obviously not enough to compete with China yet, they would need much better transport and production infrastructure. It has the obvious advantage of proximity to the US, but it will have to compete with South Asian companies to keep its first-place position.
Does bypassing mean the tariffs failed?
I do not think so, I've written so before, but I believe now that if countries other than China are to adapt to being production powerhouses, they need some time to adapt, also their increased export volume to the US will encourage them to keep a good relationship, encourage foreign investment, and invest more in their export capacity.
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