Mexico benefits from US-China trade war

Release time:

2019-04-19

The trade war between the United States and China has reportedly brought a windfall to Mexico. Many manufacturers have moved to Mexico to set up factories to circumvent the tariffs imposed by the United States on Chinese-made products. The United States is determined to win the trade war, but Mexico has benefited unexpectedly. Many manufacturers have shifted production bases or sought new resources to avoid tariffs.

Take, for example, Fuling Global Inc, a Chinese manufacturer that makes huge profits from plastic tableware in American restaurants. After President Trump imposed tariffs on all imports from China, including paper products, the company found another way to open a $4 million factory in Monterrey, Mexico, and soon ship millions of paper straws from Mexico to the United States.

Gilbert Lee, Taizhou Fuling's chief financial officer, said the company avoided tariffs by making up for higher wages at its Mexican factory with lower freight costs. Mexico is a very logical and beneficial place for them.

Fuling is not the only Chinese manufacturer to switch production to Mexico. Mexico's exports to the United States have increased significantly, mainly due to the imposition of tariffs on Chinese goods. In the last year (2018), U.S. imports from Mexico increased by 10% to 350 billion U.S. dollars, the fastest growth in 7 years, causing the U.S. trade deficit with Mexico to expand by 15% to more than 80 billion U.S. dollars, while the growth of imports from China slowed by 1/3.

In addition to the tariffs boosting Mexican exports, some companies have increased orders to Mexico, fearing Trump's threat to unwind the North American Free Trade Agreement; Trump later signed a renegotiated agreement in November. In addition, fluctuations in the U.S. dollar and the Trump administration's steel tariffs also have an impact.

Alan Russell, a consultant at Tecma Group in Texas, who specializes in assisting enterprises to set up factories in Mexico, pointed out that he never expected that the current interest of American companies in setting up factories in Mexico was the highest in his 25 years of practice. Jorge Guajardo, former Mexican ambassador to China, said that most of the goods transferred from China to Mexico for production are concentrated in low-value-added, easily replaceable goods.

Texas Taskmaster Components, which has been importing large wheels and tires from China for 20 years, is considering tariffs and hopes to invest in factories in Mexico or elsewhere, while the United States is not. Because among the remaining American manufacturers, there are no partners willing to cooperate. Mexico's proximity to the United States, convenient ports, and an educated workforce make Mexico more attractive.

After the United States imposed tariffs on its metal minerals and processed products, Mexico's exports to the United States more than doubled, while China reduced 1/4 4. Mexico's sales to the United States increased by 20%.

In addition, the trade war has also made the United States more dependent on Mexican agricultural products. Mexico is already the largest importer of American broccoli, carrots and onions and other vegetables. For example, imports of peeled garlic from China fell by nearly 1/4, while exports from Mexico increased by 54%, benefiting even small Mexican businesses.

After the United States imposed a 10% tariff on Chinese silk, Mexican sales to the United States soared from just $5,500 in 2017 to $1.6 million last year. Chinese imports of knitted and knitted fabrics fell by $3 million, about the same amount as imports from Mexico. In terms of the automotive supply chain, US passenger cars importing gasoline engines from Mexico increased by 17% to US $32.6 billion, while imports from China, Germany and Canada all fell.

China becomes the stabilizer of global trade operation

Return to List

EU issues $20 billion tax list against US

More information