The Current Trade Relationship
In the balance sheet, Mexico’s trade relationship with China has yielded little to no benefits for our country. Despite the size of their market, Chinese businesses primarily sell and hardly buy, especially not for free. During Andrés Manuel López Obrador’s administration, the trade relationship between both countries significantly increased, along with strengthened social, cultural, and even political ties.
Whether legally or illegally sourced, Mexico has become flooded with Chinese goods. Consequently, Mexicans enjoyed low-cost products, but many domestic industries have disappeared or are on the brink of extinction. Examples include footwear, matches, plastics, toys, and clothing. In less than six years, 17 Chinese car brands entered the Mexican market without much fanfare, now competing with established automotive companies that have existed for centuries.
The Chinese Economic Model
China’s capitalist economic system is heavily state-subsidized, allowing its companies to compete almost anywhere. Under this logic, Chinese businesses inevitably require government support from the host country to enter a market with conditions infinitely more favorable than their domestic ones. As a result, Chinese shoes flood the Mexican market, backed by their government’s generous currency printing, while Mexican shoemakers lack such backing from the Mexican government.
The Growing Trade Deficit
Mexico’s trade balance with China has only worsened. In the first half of this year, while Mexico purchased $62 billion worth of goods from China, it sold only $4.5 billion worth of products to China—a deficit that is 3.3% higher than the same period in 2024.
Reevaluating Trade with China
It’s clear that Mexico needs to reassess the cost-benefit analysis of trading goods and services with China, especially since they haven’t shown a willingness to buy more in six years. Meanwhile, the U.S. buys $213 billion worth of goods from Mexico every semester ($426 billion annually), essentially selling to Americans so they can, in turn, buy from the Chinese.
The ongoing tariff disputes with the U.S. have cost Mexico hundreds of millions of dollars, with tomato exports dropping by 19% in the same semester. If China isn’t willing to buy more, it’s time for Mexico to reconsider its notoriously unfavorable trade balance.
Key Questions and Answers
- What is the current state of Mexico’s trade relationship with China? The trade relationship has resulted in a growing deficit, with Mexico purchasing significantly more from China than it sells.
- How does China’s economic model impact Mexican industries? Chinese businesses, backed by state subsidies, can compete more favorably in the Mexican market, putting pressure on local industries.
- What are the consequences of Mexico’s trade deficit with China? The growing deficit has led to the decline of domestic industries and increased reliance on Chinese goods.
- Should Mexico reconsider its trade relationship with China? Given the unfavorable balance and lack of Chinese purchasing commitment, it may be prudent for Mexico to reassess its trade strategy with China.
