The Commercial Relationship Between Mexico and China Is Vibrant

The commercial relationship between Mexico and China has expanded in excess of 23% over the last four years. The bilateral trade flow between both countries reached more than $100 billion dollars last year in 2021. This figure demonstrates that it is significantly higher than during the years prior to the coronavirus pandemic (2019). During that period, Chinese exports to Mexico represented $93 billion.  Despite the steadily growing volume of trade between the two nations, there is still more room to further develop the commercial relationship between China and Mexico.

Thus far in the current year, the bilateral trade flow grew by US $384 million in the first half of 2022. This figure is higher than the same period the previous year of 2021. Likewise, there is a gigantic trade deficit between the two countries by a factor of almost 7 to 1. This means that Mexico imports $ 7 dollars’ worth of goods from China while Mexico only exports $1 dollar, according to 2020 figures.

The global investment situation that is favorable toward the nearshoring and relocation of manufacturing plants in North America is an excellent opportunity for Mexico to expand trade with China and simultaneously attract investment from China.  An activity of this nature would serve to further expand the commercial relationship between Mexico and China.

It is important to note that the lion’s share of Chinese exports to Mexico is concentrated in manufacturing and, more specifically, the electronics sector. On the other hand,  regarding Mexican exports to China copper ore stands out. In recent decades, Mexico and China have emerged as two countries with outstanding manufacturing industries. The competition between Mexico and China to attract plants has resulted in an economic rivalry, but there is also an opportunity for Mexico and China to expand their commercial relations as a result of more foreign direct investment by Chinese businesses into Mexican manufacturing facilities.

It is important to note that China has been one of the most important trading partners for Mexico in recent years. According to Trading Economics data, Mexico exported a total of just under US $9 billion dollars’ worth of goods to the Asian country in 2021.

Furthermore. China’s foreign trade has recovered after the pandemic affected both its exports and imports. According to China’s General Administration of Customs, commercial exchange between the two nations increased by more than 20% in 2021. 

Last year the commercial exchange between China and Mexico reached more than 100 billion dollars.  This is according to data compiled by the Bank of Mexico.  Of this amount, Mexico exported less than 10% of this figure to China.  In order to address the economic disparity in exports between Mexico and China, the former country must find ways to expand its sales to the latter nation.

The most exported products from Mexico to China are copper, auto parts, lead, automobiles, and pork.  On the American continent, Mexico represents China’s second most important trading partner, the first being the United States. The products that Mexico imports from China in the greatest volumes are office machine components, telephones, and  LCDs.

Mexico and China compete today for the position of first commercial partner of the United States. In the first two months of 2021, Mexico regained its position as the United States’ principal trading partner.US trade with Mexico covered almost 15% of the total trade that the former country had with the world.

Bilateral trade between Mexico and the United States reached more than $600 billion dollars and the US economy imported approximately $384 billion dollars of Mexican imports. Unlike the commercial relationship between Mexico and China, Mexico runs a trade surplus with its neighbor to the North. This is projected to continue for the foreseeable future.

In spite of the fact that many consider China to be the world’s factory, Mexico has spent several decades developing its manufacturing and export sectors. Consequently, Mexico has been able to compete closely with developed countries.

Some observers regard China as the leading manufacturer in the world, but Mexico has made significant progress in this area through the signing and implementation of an extensive network of Free Trade Agreements (13 with 50 countries). These commercial accords have generated significant levels of growth for the country’s export sector and have made Mexico a prime destination for foreign direct investment in the manufacturing sector.

In 2012, Mexico had its first trade surplus since 1997.  This achievement was due to the strengthening of its manufacturing exports, especially to the United States.  One of the necessary changes that must occur to enable the country to balance its current account is to bring the commercial relationship between Mexico and China closer to trade parity.

As of  2018, the proportion of manufactured goods as a share of Mexican exports has grown to almost 90%.

Finally, it is important to note that the commercial relationship between Mexico and China is evolving and quite complex. Among top-level Mexican economic policymakers, there is a concern in certain manufacturing sectors of the domestic economy about the role of China in world trade. 

At NovaLink, we believe that Mexican manufacturing offers the best value in terms of cost, quality, productivity, and delivery. If you are currently manufacturing your products in China but find that the tariffs imposed by the United States are adversely affecting your bottom line, consider moving your production to another country such as the United States or Mexico.