United States Spurns China for Mexico and Other Allies, Trade Data Shows

In the depths of the pandemic, as global supply chains buckled and the cost of shipping a container to China soared nearly twentyfold, Marco Villarreal spied an opportunity.

In 2021, Mr. Villarreal resigned as Caterpillar’s director general in Mexico and began nurturing ties with companies looking to shift manufacturing from China to Mexico. He found a client in Hisun, a Chinese producer of all-terrain vehicles, which hired Mr. Villarreal to establish a $152 million manufacturing site in Saltillo, an industrial hub in northern Mexico.

Mr. Villarreal said foreign companies, particularly those seeking to sell within North America, saw Mexico as a viable alternative to China for several reasons, including the simmering trade tensions between the United States and China.

“The stars are aligning for Mexico,” he said.

New data released on Wednesday showed that Mexico outpaced China to become America’s top source of official imports for the first time in 20 years — a significant shift that highlights how increased tensions between Washington and Beijing are altering trade flows.

The United States’ trade deficit with China narrowed last year, with goods imports from the country dropping 20 percent to $427.2 billion, the data shows. American consumers and businesses turned to Mexico, Europe, South Korea, India, Canada and Vietnam for auto parts, shoes, toys and raw materials.

Mexican exports to the United States were roughly the same as last year, at $323.2 billion.

America’s total trade deficit, which consists of exports minus imports, narrowed 18.7 percent to $177.8 billion. Overall U.S. exports to the world increased slightly in 2023 from the previous year, despite a strong dollar and a soft global economy.