Mexico has overtaken China as America’s biggest trading partner as the US looks to import goods closer to home and minimize its reliance on geopolitical rivals, according to Bloomberg.
America’s southern neighbor made up 15% of US imports in July, compared to 14.6% from China, according to data analyzed by the outlet.
The number of Chinese shipments in July were at their lowest level since the start of COVID, dropping by 14.5% in July compared to the same month last year, according to data released by Beijing last month.
The findings also showed that imports fell by 12.4% as the ruling Communist Party struggles to dig out of its post-pandemic funk.
Meanwhile, foreign direct investment (FDI) in Mexico is up more than 40% in the country this year as US companies increasingly shun China, Bloomberg reported.
Last month, President Joe Biden and Congress imposed trade restrictions on Beijing, which seek to protect domestic microchip and tech-related manufacturing.
Mexico is now the world’s ninth-largest FDI recipient, according to Santander Bank.
The growth comes ahead plans by Tesla to break ground on a $5 billion assembly plant in Monterrey, Nuevo León — located about three hours from the Reynosa/McAllen Texas border.
Tesla confirmed its plans for the so-called “Gigafactory Mexico” at its Investor Day in March, though it has yet to start construction and may not do so until around 2026, according to Mexican news site Reforma.
Mexico’s resurgence has helped the peso boast the world’s strongest currency this year and one of the best-performing stock markets, Bloomberg reported
The peso has been appreciating at a steady pace since 2020 thanks to the Mexican central bank, which has been hiking interest rates at a faster rate than the Federal Reserve.
The Bank of Mexico has been holding interest rates steady at 11.25% for three consecutive months, while US central bankers’ latest hike brought the benchmark federal-funds rate to a range between 5.25% and 5.5%.
As of Tuesday, $1 was equivalent to over 17 pesos.
US companies aren’t the only ones flocking to Mexico.
A survey published in July by Spanish bank BBVA showed that one in five of the new arrivals are actually Chinese businesses, probably seeking to skirt US tariffs, according to Bloomberg.
The Biden administration currently requires Chinese companies to pay a 25% tariff on its approximately $250 billion worth of exports, according to the Tax Foundation.
However, there are no tariffs on qualifying goods imported to the US from Mexico thanks to NAFTA — the North American Free Trade Agreement, which took effect in 1995.
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