In a significant shift in global trade patterns, Mexico has now overtaken China as the largest supplier of imported goods to the United States. Mexican exports to the U.S. reached an impressive $475 billion in 2023, up $20 billion from the previous year. The rise in Mexican trade reflects several converging trends: escalating trade tensions between the U.S. and China, an ongoing push to source goods closer to American shores, and the rapid growth of Mexico’s manufacturing sector. However, an additional, lesser-known factor is contributing to Mexico’s export boom—Chinese companies are increasingly using Mexico as a way to bypass U.S. tariffs.
Facing tariffs imposed by the U.S., Chinese businesses are leveraging Mexico’s logistical advantages and geographic proximity to access American markets indirectly. This tactic allows them to sidestep tariffs by manufacturing or assembling goods in Mexico before exporting to the U.S., thus benefiting from the U.S.-Mexico-Canada Agreement (USMCA), which promotes duty-free trade between the neighboring countries. Known as “tariff engineering,” this method involves shipping parts from China to Mexico for final assembly, which allows companies to label the products as Mexican-made, qualifying them for reduced tariffs or complete exemption under USMCA.
The trend, spurred by the U.S.-China trade conflict, has led to an unprecedented demand for logistics infrastructure and manufacturing facilities in Mexico. Warehouses and factories are rapidly expanding in key locations such as Mexico City and the border region around El Paso, Texas. Mexican logistics firms are ramping up their operations to handle the surge in goods moving northward, and investments in Mexican supply chains are at an all-time high. This shift is not only transforming Mexico into a manufacturing powerhouse but also creating a closer economic dependency between Mexico and the U.S.
CNBC recently explored this phenomenon by traveling to Mexico City and El Paso, revealing how Mexican logistics companies and multinational manufacturers are scaling up to meet new demands. According to industry insiders, Chinese firms are increasingly partnering with Mexican manufacturers to produce goods with parts imported from China, thus meeting the “Made in Mexico” requirements to qualify for tariff exemptions. This practice has helped China maintain a strong presence in the U.S. market despite ongoing trade restrictions.
U.S. trade officials have expressed concern about the growth of these circumvention practices, and discussions have started about potential updates to trade policies. However, U.S. companies reliant on Mexican imports see benefits in this new setup, with reduced transportation costs and shorter supply chains contributing to a more resilient flow of goods.
As the geopolitical landscape shifts, the rise in Mexican trade serves as both a solution to U.S.-China tensions and a potential challenge to existing trade rules. For now, the trend suggests a continued deepening of the North American trade bloc, reshaping the logistics industry in both Mexico and the U.S. while allowing China to maintain a strategic foothold in the American market.
