The US has a new top import source

For the first time since 2009, a country has exported more goods to the US than China has. That country is Mexico. What’s the story?

  • 🏭 Proximity: A lot of Mexico’s production is near the US border
  • 🤝 Integration: Inputs can criss-cross the border pretty seamlessly
  • 🛃 Treaty: The US-Mexico trade pact has kept tariffs down while harmonising standards, and
  • 🧑 Costs: Labour in Mexico now generally costs less than in China

In this context, there’ve been some headline-grabbing moves to Mexico:

  • 🚗 Tesla is building a ~$10B gigafactory near Monterrey, and
  • 🛋️ Even Chinese companies like upholsterer ManWah are in Mexico to cut costs and avoid tariffs, while hedging political risk.

But… while Mexico’s exports are up, these big new inbound investment headlines aren’t showing too much in the data yet.

Intrigue’s take: So what does this all mean? First, the deterioration of US-China ties might’ve sped up Mexico’s emergence as America’s top supplier, but some of the underlying trends (like labour costs) have been a long time coming.

And second, there are lots of reasons to invest in Mexico, but investors are still thinking through other options like Vietnam and India, as well as local issues around energy, water, security, and governance.

Also worth noting:

  • Canada remains America’s top trade partner overall (i.e., taking into account imports and exports of goods and services).