The US now buys more goods from Mexico than from China
Chinese imports are down as companies begin to "nearshore" in Mexico
Keep your firms close…
China, historically known as the factory of the world, is increasingly setting up new branches in another industrial powerhouse: Mexico. The practice of Chinese companies bringing their production closer to the US — or “nearshoring” — has seen a serious uptick, with a BBC report outlining how a furniture manufacturer that only set up shop in Mexico 2 years ago already employs more than 450 people.
There’s a whole range of reasons why foreign businesses may want to set up production outlets nearer to the US. Saving on shipping is an obvious benefit for any overseas company, but Chinese firms have extra incentives: the strategy allows them to also evade tariffs that can reach up to 25% when selling into the US — a cost that has risen since the escalation of the trade war between the superpowers.
That trade war has seen American imports from China drop precipitously, and in February, the US bought $32bn worth of Chinese goods, while imports from Mexico totalled $40bn, some 25% more.
Hecho en México
While nearshoring is clearly a financial boon for Chinese manufacturers, it’s provided a very welcome economic boost to America’s southern neighbor too. Indeed, the Mexican Association of Private Industrial Parks has pointed to the phenomenon as a driving force for industrial park capacity, with the authority anticipating demand for 8 million square meters of new commercial space by 2027.
