Is Mexico replacing China in US supply chains?

Hanzhen Ouyang and Shuo Shi

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: In 2023, Mexico exceeded China and became the largest trade partner of the US. Will Mexico further replace China and rise to a strategically vital supplier for US supply chains? This working paper shows that although US supply chain sources are shifting from China to Mexico, China remains the primary value-added source of Mexican exports to the US market. Moreover, Mexican exports to the US rely on low-skill sectors, whereas more Chinese exports are high-skill goods. The current US trade shift is likely caused by China’s FDI inflows to Mexico’s traditionally competitive export sector. However, Mexico lacks edge-cutting manufacturing firms to substitute China in US supply chains. Therefore, the US strategy of “trade diversion” cannot support Mexico’s role in reducing the US supply chain dependence on China. The US should rethink a sustainable trade framework that promotes stable cooperation with China.

Keywords: supply chains; Mexico-China competition; USMCA; trade diversion (search for similar items in EconPapers)
JEL-codes: L81 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-cna, nep-ind and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://eprints.lse.ac.uk/123941/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:123941

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().