China is losing its position as the largest supplier of manufactured goods to the US market, with Mexico and other Asian countries emerging as alternative suppliers. Mexico, India, Vietnam and Thailand are becoming more important in the US trade structure, particularly in the industrial sectors producing critical goods, such as electronic components.
China’s share is decreasing in regard to supply of manufactured goods
China is being supplanted by Mexico and other emerging manufacturing hubs in Asia in the US market.
The total US imports value of Chinese goods shrank by 20% over 2018-2023 to USD493 billion in the latter year
Source: Euromonitor International
The restructuring of US trade started in 2018 after a round of trade tariffs on various Chinese goods were introduced. The outbreak of the COVID-19 pandemic and consequent supply chain disruptions as well as rising geopolitical tensions between the US and China are further encouraging trade diversification efforts.
Mexico and Asian countries are emerging as key alternative suppliers
Mexico was the fastest growing US imports partner over the period 2018-2023.
The imports value of manufactured goods from Mexico soared by 46%
Source: Euromonitor International
Mexico is already the critical US trade partner and plays an important role in US supply chain diversification efforts.
Asian countries such as India, Vietnam and Thailand are also becoming more important in the US trade structure. Over 2018-2023, the total imports value from these countries soared from 50% to 80%. Asian countries are forecast to gain greater share in the US trade structure at the expense of Chinese suppliers, as the US is encouraging a diversification from China strategy and many US companies are setting up alternative production networks in Vietnam, India and Thailand.
Mexico is the key supplier of automotive products, and could lift electronics exports
Mexico is already the critical US trade partner for automotive products and related components, such as electrical equipment for vehicles.
Over 2018-2023, the US automotive imports value from Mexico increased by 40%. Overall, Mexico accounts for one third of total US automotive imports
Source: Euromonitor International
Mexico will play a critical role in US efforts to decouple from China and could further strengthen production and trade in machinery, computers and battery components sectors. For example, in 2024, the Mexican government started collaboration with manufacturing and tech companies to identify which components could be made locally. Mexico has also indicated interest in increasing collaboration with US aerospace, semiconductor and electronic component manufacturers to boost production in Mexico and reduce reliance on Chinese imports.
China has lost some of its positions in the US electronics trade structure. For example, over 2018-2023, the US imports value of mobile phones, electronic components and computers from China shrank by 20-30%. The introduction of tariff and non-tariff measures that restrict trade with China and production diversification into countries such as India and Vietnam helped to reduce US reliance on Chinese imports.
However, China still continues to dominate in US electric vehicle (EV) supply chains.
China accounted for 52% of the total US battery imports value in 2023, up from a 30% share in 2018
Source: Euromonitor International
Growing EV production in the US and the dominance of Chinese companies in the global battery industry resulted in growing trade. US manufacturers are collaborating with domestic and Korean companies to develop domestic battery production and reduce reliance on imports, yet it will take time to see the full effects.
Malaysia, Vietnam and Thailand gain more ground in electronics trade
Over 2018-2023, Southeast Asian countries gained greater share in the US electronics trade. For example, Malaysia remains the largest US import partner for electronic components, while Vietnam and Thailand gained greater share in the mobile phone and computer industries. Rising labour costs in China and consequent production outsourcing to other Asian countries, higher geopolitical tensions and supply chain diversification efforts have all contributed to the declining imports of electronic products from China.
The administration of President Trump may also add more uncertainty to the global and US trade. Under the proposed rules there could be an additional 10% trade tariff on Chinese goods and a 25% tariff on imports from Mexico and Canada. The latter would be particularly challenging, as Mexico is among the key trade partners for the US and plays a significant role in US production diversification efforts.
More insights on global trade and supply chain diversification are available in Trends in Global Trade Amid Rising Economic Fragmentation and our Supply Chain Optimisation report.
