US imports from MEXICO surpassed China for the first time

US imports from MEXICO surpassed China for the first time in 20 years with $476 billion crossing the southern border… while goods from China fell 20% to $427 billion

Annual U.S. imports of goods from Mexico last year exceeded those from China for the first time in two decades, according to newly released federal data.

Commerce Department trade data released Wednesday showed imports from Mexico rose slightly to $476 billion in 2023, while Chinese imports fell 20 percent year-on-year to $427 billion.

Imports from Canada, America's third-largest trading partner, trailed just behind China and totaled $421 billion this 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 left China firmly established as the U.S.'s largest source of imports, producing everything from clothing and toys to electronics for American consumers.

Annual U.S. imports of goods from Mexico last year exceeded those from China for the first time in two decades, according to newly released federal data

Shifts in U.S. consumer spending after the pandemic — away from goods like furniture and electronics toward services like travel and entertainment — were also a factor in weakening demand for Chinese imports.

The decline in Chinese imports is also due to Washington adopting an approach it calls “friendshoring.”

The move involves diversifying U.S. supply chains across allies and partners amid rising concerns about competition with China and national security tensions between the world's two largest economies.

Throughout the 1980s and 1990s, Canada was by far the largest source of U.S. goods imports, followed by Mexico and then China.

China first overtook Mexico in 2003 and then dueled with Canada for the top spot starting in 2007, coming out on top after the Great Recession.

The U.S. trade deficit with China was a policy focus during the trade war between the two countries under the administration of former President Donald Trump, who imposed tariffs on Chinese goods.

The Biden administration has generally stuck with trade tariffs, although with toned down rhetoric.

Last year, the total U.S. trade deficit in goods and services, defined as exports minus imports, shrank significantly from $951.2 billion in 2022 to $773.4 billion.

Imports fell, partly due to a decline in consumer spending on high-priced items due to rising interest rates and economic uncertainty.

A file photo shows containers at the Port of Long Beach.  Last year, the overall U.S. trade deficit in goods and services, defined as exports minus imports, shrank significantly

A file photo shows containers at the Port of Long Beach. Last year, the overall U.S. trade deficit in goods and services, defined as exports minus imports, shrank significantly

But U.S. exports also rose by $35 billion, or 1.2 percent, thanks to increases in travel, financial services, transportation and information.

In 2022, the country experienced its largest government data deficit since 1960.

Surprisingly robust consumption last year helped support the U.S. economy, but analysts expect higher interest rates to curb consumer spending and increase pressure on imports.

In December, the deficit rose slightly to $62.2 billion from November, the new data showed.

This was up from the revised figure of $61.9 billion in November.

With both imports and exports increasing in the final month of last year, analysts viewed the report as an encouraging sign for global trade.

“The real trade deficit contributed positively to growth in the quarter,” said Matthew Martin, U.S. economist at Oxford Economics.

He added that “exports will continue to perform well and benefit from a weaker dollar as the cost of U.S. goods becomes relatively cheaper abroad,” and expects net trade to continue to make a positive contribution to GDP in early 2024 -will achieve growth.

But Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note that “the outlook for future trade flows is likely moderate.”

This was due to “expectations of slower future demand and growth both domestically and internationally,” she said.