Mexico Surpasses China as Top U.S. Trade Partner for the First Time in Two Decades

In 2023, Mexico reclaimed its position as the United States’ top trade partner, surpassing China for the first time in two decades, according to recent data from the U.S. Census Bureau. This year, trade between the U.S. and Mexico amounted to $798.83 billion, signaling a notable shift in trade dynamics. While significant, this figure still falls short of the highest-ever recorded U.S.-China trade volume of $817.36 billion in 2018.

Overall U.S. trade decreased by 3.85% in 2023, totaling $5.1 trillion, the second-highest on record, following the $5.3 trillion total in 2022. This decline was accompanied by several noteworthy changes in U.S. trade patterns, including new leaders in top port, export, and import categories.

Port Laredo emerged as the nation’s top port, driven largely by its substantial trade with Mexico, which surpassed Canada to become the U.S.’s top trade partner after two years. The most significant U.S. export shifted to oil, overtaking gasoline and other refined petroleum products. In terms of imports, passenger vehicles took the lead, replacing oil as the most significant import.

Despite global economic challenges and a strong dollar, American exports saw a slight increase in 2023. Conversely, U.S. imports declined as domestic consumption of various goods, including crude oil, chemicals, and consumer items like cellphones, clothing, camping gear, toys, and furniture, decreased. The overall U.S. trade deficit remained above the $1 trillion mark for the third consecutive year, totaling $1.1 trillion.

The export-to-import ratio reached 40% for exports in 2023, a level not seen since 2019. This ratio has historically fluctuated, reflecting slow and steady changes akin to the movement of a container ship rather than a cargo jet, ranging from 35% in 2005 to 41% in 2014.

Mexico, Canada, and China continued to dominate U.S. trade, collectively accounting for 42.1% of the total $5.1 trillion in U.S. trade for 2023, maintaining consistency with past years. Among other significant trade partners, Germany now ranks as the fourth most important, surpassing Japan, which has reached its lowest rank in over three decades.

The U.S.-China trade relationship has seen significant contractions, particularly in the context of ongoing geopolitical tensions and tariff policies initiated under the Trump administration and continued by the Biden administration. This has resulted in a notable slowdown in trade with China, which for the first time since 2020 did not exceed $600 billion.

The adjustments in global trading relationships are also evident in corporate strategic shifts. For instance, Schneider Electric has expanded its manufacturing presence in Mexico in response to the U.S. climate law and broader geopolitical tensions, such as those arising from the conflict in Ukraine. This law, among other factors, is steering companies to diversify their supply chains and consider more stable trading relationships, like those with Mexico, which is seen as a less risky alternative to China.

South Korea has also adapted to these changes, benefiting from the U.S. climate legislation that favors local sourcing for electric vehicle components. This has encouraged significant South Korean investment in U.S. manufacturing, particularly in the electric vehicle sector.

As U.S. trade dynamics continue to evolve, shaped by economic pressures, policy changes, and geopolitical shifts, the patterns observed in 2023 provide a clear indication of the changing landscape of international trade. These trends not only reflect the current economic environment but are also likely to influence the future directions of global trade relationships.

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