Mexico Replaces China as Biggest US Trading Partner

China is no longer the U.S.'s largest trading partner. The superpower's share of exports into the U.S. reached its lowest level this year since 2006, according to data released Sept. 6 by the U.S. Census Bureau.

In its place now is Mexico, which has emerged as new go-to for imported goods as the U.S. decreases its reliance on Chinese goods, a shift driven primarily by increasing investment from the U.S. auto industry.

Since 2021, GM, Kia Motors and BMW all all made electric vehicle investments in Mexico, Bloomberg reported. In May, Tesla announced at its annual shareholder presentation that it was building in a factory in Monterey, Mexico.

In July, U.S. imports of goods from China came to $36 billion, according to the Census Bureau, while imports of Mexican goods came to nearly $39 billion.

Bloomberg's analysis found that in the 12 months through July China's share of U.S. imports was an average of 14.6% — its lowest level since 2006. Mexico's average share during the same period was 15%.

Luis Torres, a senior business economist with the Federal Reserve said the shift started to occur during President Donald Trump's trade war with China.

"The dynamic changed in 2018 when the U.S. imposed tariffs on China’s goods and with subsequent pandemic-era supply-chain disruptions that altered international trade and investment flows worldwide," wrote Torres, who works in the Fed's San Antonio branch in a July article on the Fed's website.

Just prior to Trump's tariffs going into effect on March 22, 2018, China's share of U.S. imports of goods its reached with an average of 21.8% in the 12 months through March 2018, according to Bloomberg.

The auto industry is a key factor in the growth of U.S.-Mexico trade, which Torres calls an "especially active example of the cross-border manufacturing relationship." In July, Mexico had the highest amount of vehicle and parts exports into the U.S. at $14.6 billion. Japan came in second at $4.9 billion.