Introduction
According to an analysis released by the United States International Trade Commission (USITC), there has been a noticeable rise in the exportation of intermediate goods from China to Mexico. This increase likely supports Chinese assembly operations in Mexico, though specific global data is not provided; instead, sectoral trends are highlighted.
Sectorial Trends: Automotive Parts
One significant trend is the surge in Mexican imports of automotive parts from China. In 2013, these imports amounted to $2,000 million, but by 2023, they had grown to nearly $5,300 million. The top three categories of Mexican imports from China in 2023 were automotive body parts and accessories ($711.3 million), brake components ($613.4 million), and wheels ($562.7 million). These categories accounted for over 36% of Mexican imports of automotive parts from China in 2023, as per the USITC analysis.
China’s Position in Automotive Parts Imports
Over the decade, China has been the second-largest source of imported automotive parts for Mexico after the United States. However, the gap between China and other sources of automotive parts for Mexico widened considerably during this period.
Chinese Investments in Mexico
In 2023, at least three Chinese investments totaling $650 million were reported for plants that would melt and produce aluminum parts. These investments might have aimed to serve as an outlet for excess Chinese aluminum capacity, which is relatively expensive to export to the United States due to a 25% tariff on Chinese imports and Section 232 duties.
Impact of US-Mexico Agreement on Aluminum
Under a July 2024 agreement between the United States and Mexico, aluminum melted in China and cast or poured in Mexico would still be subject to Section 232 tariffs. By assembling Chinese aluminum parts in Mexico, producers might not comply with the automotive origin rules of the United States-Mexico-Canada Agreement (T-MEC), which requires 60 to 75% regional value content depending on the part. However, they would likely face significantly lower U.S. tariffs than if the parts were assembled in China.
Implications for Chinese and Mexican Industries
The USITC working document concludes that Chinese investments in Mexico’s automotive and electronics industries could enable Chinese companies to legally assemble products with substantial Chinese content in Mexico and export them to the United States, paying specific Mexican tariffs instead of Chinese ones.
Tariff Comparisons
The tariffs on US imports of automotive and electronic goods from Mexico could be lower than those from China, owing to the T-MEC and any specific Chinese tariffs in effect. The USITC analysis suggests that at least some Chinese manufacturers in both sectors, particularly automotive, are already capitalizing on this opportunity, and more are likely to follow.
Conclusion
Key Questions and Answers
- Q: What is the main focus of the USITC analysis? A: The analysis highlights sectoral trends in trade between China and Mexico, with a focus on intermediate goods.
- Q: How have Mexican imports of automotive parts from China changed over time? A: Mexican imports of automotive parts from China increased from $2,000 million in 2013 to nearly $5,300 million in 2023.
- Q: What are the top three categories of Mexican imports from China in 2023? A: The top categories were automotive body parts and accessories, brake components, and wheels.
- Q: How might Chinese investments in Mexico impact the automotive industry? A: These investments could enable Chinese companies to assemble products with substantial Chinese content in Mexico and export them to the U.S. with lower tariffs.
