'To Bypass US Export Routes' China Sees 30% Increase in Mexico Container Exports Last Year

Avoiding US High Tariffs and Sanctions by Routing Through Mexico

Last year, the volume of container shipments from China to Mexico increased significantly. As the United States imposed high tariffs on China and restructured global supply chains, accelerating US-China decoupling, it is analyzed that China is actively seeking a detour for exports to the US through Mexico.

According to Geneta, a global shipping and air cargo freight rate analysis company, on the 21st (local time), the number of containers China sent to Mexico in 2023 was 881,000 twenty-foot equivalent units (TEUs), up 27.8% from 689,000 units a year earlier.

The increase in container shipment volume from China to Mexico occurred at a time when China’s export routes to the US narrowed due to escalating US-China conflicts. The Joe Biden administration has excluded China from the global supply chain and maintained the high tariffs on China imposed by the previous Donald Trump administration. As a result, the share of Chinese goods in total US imports has decreased from the 20% range in 2017 to about 15% currently.

Thus, it is analyzed that China is attempting to increase exports to its major market, the US, via the detour of Mexico. This strategy exploits the United States-Mexico-Canada Agreement (USMCA), a free trade agreement among the three North American countries, which applies lower tariffs when exporting to the US through Mexico. Coincidentally, last year when China’s exports to Mexico increased, Mexico surpassed China to become the largest importer to the US.

Robin Brooks, former chief economist of the Institute of International Finance (IIF), said, "The US is the world’s largest consumer market, and China is the world’s largest producer. These two must meet in some way."

China’s detour export movement to the US is particularly prominent in the automotive sector. According to the Mexican National Auto Parts Industry Association (INA), parts exported to the US by 33 Chinese companies with factories in Mexico increased from $711 million in 2021 to $1.1 billion last year. The US imposes an additional 25% tariff on Chinese-made automobiles and parts, but this rate can be significantly reduced by routing through Mexico. Mexican-made cars are subject to a 2.5% tariff, and parts assembled in Mexico face a 0-6% tariff on exports to the US.

China is relocating production bases not only to Mexico but also to Vietnam, Singapore, and the Philippines. Behind these countries, which are expanding their trade surpluses with the US, stands China, hiding the "Made in China" label and increasing exports to the US.

Additionally, China is actively utilizing the US tariff law that exempts import duties on goods priced under $800. According to an analysis of US government data by Yale economist Amit Khandelwal, the number of goods eligible for duty-free import under the $800 threshold reached 1 billion last year, tripling since 2017.

Eric Debetaz, Chief Product and Data Officer at Geneta, pointed out, "Reducing dependence on China may be an easy phrase for politicians, but the reality is very different. The true restructuring of global manufacturing takes years and requires massive investment and state intervention as a large-scale project."

This content was produced with the assistance of AI translation services.