March 4, 2024

China Economic Update – 4 March 2024

Reports of US supply chain realignment from China to Mexico are overblown

US trade data generated a lot of headlines in early February, with the Census Bureau reporting that Mexico overtook China to be the leading source of imports in 2023. In taking these data at face value, many commentators implied this this result pointed to a substantial shift in US supply chains away from China. However, we argue that this is unlikely to be the case, and that absent from major trade policy measures, any major realignment will be a slow process.

Are US consumers swapping China for Mexico?

China’s rapid industrialisation and accession to the World Trade Organization led to a surge in exports from the early 2000s onwards, including to the United States. On a twelve-month rolling sum basis, US dollar imports from China reached similar levels to Canada by early 2007, before becoming the clear number one source in early 2009. While the value of US imports from China declined sharply in the wake of the US-China trade war, this trend reversed during the COVID-19 pandemic, as demand for key goods such as electronics, furniture and medical supplies surged.

For further details, please see the China Economic Update (4 March 2024)