Manufacturers of Chinese goods are increasingly shipping via Mexico in order to avoid the impact of tariffs on imports directly to the US, a new analysis has found.
A review of customs data by the Financial Times (FT) and Xeneta revealed the number of 20-foot containers shipped from China to Mexico reached 881,000 in the first three quarters of 2023, up from 689,000 in the same period of 2022.
It was suggested that many of the goods imported are then moved onto trucks in order to complete their journey, as evidenced by growing numbers of cross-border shipments from Mexico to the US.
The publication noted that direct shipments to the US from China have fallen from around a fifth of the US' total imports in 2017 to around 15 percent today, following the introduction of new tariffs by the administration of Donald Trump, many of which have been retained or expanded on by current president Joe Biden.
Erik Devetak, chief product and data officer at Xeneta, told the FT: “Reducing reliance on China is an easy sound bite for politicians, but the reality is very different.”
He added that a true realignment of manufacturing to cut the US' dependence on Chinese goods would be "a vast undertaking which will take many years and a colossal amount of investment and state intervention to achieve”.
Among the main beneficiaries of using Mexico as a stop on the supply chain is China's auto manufacturing sector. Figures from the INA, Mexico’s trade body for auto parts suppliers, show that there were 33 Chinese-owned companies with Mexican operations in 2023. These shipped $1.1 billion worth of parts to the US, up from $711 million in 2021. Meanwhile, Mexico imported almost $9 billion of vehicle parts from China last year.
Currently, cars and auto parts shipped directly to the US from China are subject to tariffs of 25 percent. However, automobiles manufactured in Mexico only attract a 2.5 per cent US levy, while parts put together in Mexico incur tariffs of between zero and six percent.
The FT noted that Mexico is looking to address the issue, introducing its own tariffs of between five and 25 percent on Chinese imports last year, but added it is unclear how effectively these will be enforced.
