US imports from MEXICO beat China for first time in 20 years with $476B crossing the southern border…while goods from China slump 20% to $427B

Annual U.S. imports of goods from Mexico surpassed those from China last year for the first time in two decades, according to recently released federal data.

Trade data from the Commerce Department shows that imports from Mexico rose modestly to $476 billion in 2023, while Chinese imports fell 20 percent this year to $427 billion.

Imports from Canada, America’s third largest trading partner, were just behind China at $421 billion this year.

After years of pandemic-related supply chain disruptions, simmering trade disputes and political tensions between DC and Beijing, US consumers and businesses appear to be increasingly turning to alternative trading partners.

It’s a reversal of a two-decade trend in which China was firmly entrenched as the largest source of U.S. imports, producing everything from clothing and toys to electronics for U.S. consumers.

Post-pandemic shifts in U.S. consumer spending — away from goods like furniture and electronics, in favor of services like travel and entertainment — have also been a factor in weakening demand for Chinese imports.

The decline in Chinese imports is also because Washington is following an approach it calls ‘friendshoring’.

The move includes diversifying U.S. supply chains across allies and partners amid increased concerns about competition with China and national security tensions between the world’s two largest economies.

Throughout the 1980s and 1990s, Canada was the leading source of U.S. merchandise imports by a wide margin, followed by Mexico and then China.

China first overtook Mexico in 2003, then battled with Canada for first place starting in 2007, taking a clear lead after the Great Recession.

The U.S. trade deficit with China was a political focus during the trade war between the two countries under the administration of former President Donald Trump, who imposed tariffs on Chinese goods.

The Biden administration has generally kept the trade tariffs in place, albeit with toned-down rhetoric.

Last year, the overall U.S. trade deficit for goods and services, which is defined as exports minus imports, shrank significantly from $951.2 billion in 2022 to $773.4 billion.

Imports fell, partly due to a drop in consumer spending on expensive items due to rising interest rates and economic uncertainty.

A file photo shows containers at the Port of Long Beach. Last year, the overall U.S. trade deficit for goods and services, which is defined as exports minus imports, shrank significantly

But U.S. exports also rose by $35 billion, or 1.2 percent, thanks to increases in the travel, financial services, transportation and information sectors.

In 2022, the country experienced the largest shortage of government data dating back to 1960.

Last year’s surprisingly resilient consumption helped support the U.S. economy, but analysts expect higher interest rates will slow consumer spending and increase pressure on imports.

In December, the deficit grew slightly from November to $62.2 billion, the new data showed.

This was up from the revised level of $61.9 billion in November.

With both imports and exports growing in the final month of last year, analysts saw the report as an encouraging sign for global trade.

“The trade deficit in real terms contributed positively to growth this quarter,” said Matthew Martin, US economist at Oxford Economics.

He added that “exports continue to perform well and will benefit from a weaker dollar as the cost of US goods abroad becomes relatively cheaper,” expecting net trade to also make a positive contribution to GDP in early 2024 -grow.

But Rubeela Farooqi, chief US economist at High Frequency Economics, said in a note that “the outlook for future trade flows is likely muted.”

This is due to “expectations of slower demand and growth in the future, both domestically and abroad,” she said.