Mexico replaces China as the most important trading partner of the United States

Mexico; America’s best friend, old and new, in the global economy.

According to a new post from Luis Torres, chief economist at the Federal Reserve Bank of DallasMexico has once again consolidated its position as the most important trading partner of the United States: in the first four months of this year, goods worth $263 billion (€241.6 billion) were exchanged between the two countries. Trade with Mexico accounted for 15.4 percent of US exports and imports, just ahead of US trade with Canada and China, which accounted for 15.2 percent and 12 percent, respectively.

Even if the world has passed the peak of the pandemic, Mexico’s ability to outpace China — which has spent the past two decades integrating into the US economy — is a clear sign of how economic chaos will grow from 2020 and also define the global economy in the years to come.

According to Torres, the seeds of that change were already being sown before the pandemic — with former President Donald Trump’s imposition of tariffs on some Chinese goods and the signing of the US-Canada-Mexico trade deal, a slight update to the nearly three-decade-old NAFTA agreement. . However, according to Torres, the changes also signal an accelerating shift towards proximity, a practice in which countries move their supply chains for essential commodities to countries that are physically and politically close.

“Although data on convergence has been scarce recently and the evidence is largely anecdotal, protectionism and associated industrial policies are consistent with less global trade, more regional trade, convergence and repatriation (repatriation of production)” Torres Books.

the Transfers to nearby locations have increased during the pandemicBecause the cost of shipping products across the Pacific has increased and consumers want faster delivery times—the latter we call the “Amazon Prime effect.” Peter S. Goodman from The New York Times He wrote earlier this year that amid rising political tensions between the United States and China, companies like Wal-Mart are increasingly looking for ways to meet their needs closer to home.

“It’s not about deglobalisation, it’s the next level of globalization focused on regional networks,” said Michael Burns, managing partner of the Murray Hill Group, an investment firm focused on the supply chain.

Sloan George/The Washington Post via Getty Images

In her new book, The Globalization Myth: Why Regions Matter, Shannon O’Neill advocates regionalization over globalization, saying it would help American workers if manufacturing was closer to home. In his review of O’Neill’s book NPR’s Greg Rosalski sums up the reasoning:

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The average import from Mexico, O’Neill writes, is 40 percent made in the United States, which means that 40 percent of the parts that go into the final product are still made in the United States. On the other hand, Canadian imports average 25 percent of those in the United States. “And what about a product that comes from China? Only 4 percent of those are made in the United States.

However, President Joe Biden has sought to improve relations between the US and China in recent months after tensions escalated in recent years, including after a Chinese spy balloon was shot down in February. Secretary of State Antony Blinken met Chinese leader Xi Jinping in June, and Finance Secretary Janet Yellen recently took a four-day trip to China.

Blinken and Xi pledged to stabilize Sino-US relations. Yellen expressed concern about “unfair economic practices” but said she hoped the two sides could work more closely together because “the world is big enough for our two countries to thrive.”

With the constant movement, particularly with China, one thing is clear: Trade between Mexico and the US appears to be as strong as ever and looks set to continue to grow.

Read the original article in English here.