By Vincent  Wen.    Photo：Chris LeBoutillier

As the largest manufacturer and exporter of the United States for a long time, China has played an important role as "the world factory" in the global supply chain. However, after the decline in China–United States relations, trade restrictions between the two sides caused the global supply chain to begin to fluctuate. From January to May- this year, the imports of U.S. from China went down about 25% compared to last year, reaching their lowest level for 20 years. During the same period, U.S. imports from Mexico grew to $195 billion, the highest record in history.

China is no longer a low-cost country

Since 2001, China's huge population and the low cost have attracted countless foreign investors to enter, and China has also followed suit, lifting 150 million people out of poverty. However, as labor cost is rising these years, and the impact of last year’s Zero-COVID policy in China, factors like government policies, trade wars, geopolitics, etc. are also important things that foreign investors need to consider now. Compared to China, the countries like Brazil, Thailand, Malaysia, Vietnam, Mexico, and India are with lower costs, which are all in the new direction of manufacturing transfer.

Mexico export surges to U.S. market

As China's influence is being weakened, Southeast Asian countries are also exporting more goods to the United States. In the first five months of this year, the United States imported up to 124 billion U.S. dollars from ASEAN countries. Except transferring industries, many Chinese manufacturers also
exported goods to Southeast Asia for illicit transshipment. It has led to certain items being targeted by the US government who expands the scope of tariffs to Southeast Asia. In addition to Southeast Asian countries, South America is also a good investment target for manufacturers. In the past two years, Importers in U.S. has experienced high transportation costs and port congestion, which has led to supply chain instability. In this situation, Mexico has cheap labor costs and is geographically close to the United States that it has become an ideal location for a production factory. U.S. importers can significantly reduce transportation time and costs. The relationship between the United States and Mexico Cross-border transportation will also become more frequent.

According to U.S. statistics, in the first 10 months of last year, Mexico exported goods to the United States worth US$382 billion, an increase of more than 20% over the same period in 2021. Since 2019, U.S. imports from Mexico have grown by more than 25%. Trade experts say China will likely
remain a core role in manufacturing of global supply chain in the coming years，but due to geopolitical and cost implications, the shift to Mexico represents a reallocation of global manufacturing capacity.

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