As per the data released by the United States Census Bureau, Mexico has replaced Canada to be the top U.S trade partner. The data available till August 2022 reveals that the total import to the US from Mexico stands at 302,184.6 million US dollars.
The break-up of this data is given below-
- For the month of January 2022, the US imported $33,257.3 million worth of goods.
- For the months of February and March, the US imported $32,536.3 million and $40,450.1 million worth of goods, respectively.
- For the months of April and May, the US imported $38,874.3 million and $39,506.8 million worth of products, respectively.
- As for June and July, the import was worth $39,432.1 million and $37,813.6 million.
- In August, the total import was worth $40,314.0 million.
The Devil Is in the Detail: Canada Remains the Top Export Destination for the US
Although Mexico has become the top US trade partner as of August 2022, when it comes to export, Canada retains the top spot. In fact, Canada has mostly remained the top US export destination.
The total export to the country stands at $217,937.8 million, while the total export to Canada stands at $237,339.0 million.
As of August 2022, the overall trade between the U.S and Mexico stands at $520122.4 million (Import = $302,184.6 + export = $217,937.8).
And the total trade between the U.S and Canada stands at $536832.7 million (Import = $299,493.7 + export = $237,339.0)
As you can see, in terms of overall trade (import + export), Canada retains the top spot.
Comparing This Development with Historical Data
When you see this news against historical data, it does not appear surprising. Canada has always been the US favorite in terms of export, while Mexico has largely been the US favourite in terms of export.
The yearly import data is given below-
Hence, yearly imports from Mexico have consistently remained #1 in monetary terms.
However, if you consider both import and export, Canada emerges as the top U.S trading partner.
During the pandemic years, Canada experienced harsh lockdown measures and hence only in 2019 and 2020 Mexico overtook it to become the top trading partner in terms of net trade (import + export).
Exclusive Analysis: Why Is Mexico Winning and China in the No.3 Spot?
As per the Census report, the top 3 products that the US imported from Mexico were-
- Computers
- Passenger Vehicles
- Motor vehicle parts
This clearly shows that the US companies are trying to fight the supply chain crisis by importing from nearshore countries. This is specifically true for the vehicle segment. On the one hand, manufacturing EVs and their batteries in North America makes businesses eligible for IRA incentives. And on the other hand, EVs are heavier than traditional vehicles, which means that if businesses import EVs from China, they have to take into account the fact that one ship can’t carry as many EVs as it can carry ICE vehicles. Hence importing EVs via land – from Mexico or Canada makes sense.
This analysis makes more sense when you read the past news of how the US vehicle manufacturers are pushing for building manufacturing hubs in Mexico-
- CATL- the Chinese EV battery makes plans to set up a manufacturing plant in Mexico to be closer to its target customers.
- General Motors has begun converting its plant in Mexico that manufactured ICVs into an EV manufacturing plant.
Along with this, the free trade agreement between the US, Mexico and Canada is further bolstering the trade relationship between the two countries.
Will we see such nearshoring strategies in other countries as well? Let’s wait and watch.