Is Mexico replacing China in US supply chains?

Ouyang, Hanzhen and Shi, Shuo (2024) Is Mexico replacing China in US supply chains? Working paper series, 10 (1). LSE Global South Unit, London, UK.

Text (GSU Working Paper 10 - 1 (2024)) - Published Version Download (1MB)

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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.

Item Type:	Monograph (Working Paper)
Additional Information:	© 2024 The Authors
Divisions:	LSE
Subjects:	H Social Sciences > HF Commerce J Political Science > JZ International relations
Date Deposited:	21 Jun 2024 10:06
Last Modified:	21 Jun 2024 10:06
URI:	http://eprints.lse.ac.uk/id/eprint/123941

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