China Uses Mexico to Evade U.S. Tariffs

What’s happening: China is shipping an increasing volume of goods to the United States through Mexico to bypass steep tariffs originally imposed by Trump and preserved by Biden.

• Trade war: In 2018, Trump placed restrictive tariffs on imported Chinese goods to transition away from economic reliance on China and revitalize American manufacturing.

Nearshoring: Because of U.S. participation in the United States-Mexico-Canada Agreement (USMCA), imports from Mexico are not subjected to the same tariffs. As China's economy struggles, Chinese companies are finding loopholes in tariff codes; their products are making their way into the U.S. through Mexico to dodge the levies.

• The data: According to freight logistics analytics platform Xeneta, imports from China into Mexico jumped by 57.9 percent between January 2023 and January 2024. In 2022, the increase was only 3.5 percent.

• Made in Mexico: China has invested billions in Mexico, establishing manufacturing facilities there to preserve America’s reliance on Chinese trade. By 2023, Mexico surpassed China as the largest exporter of goods into the U.S.

The US reacts: In a January letter to Congress, Trade Representative Katherine Tai sounded the alarm about China skirting U.S. tariffs and pledged to work with lawmakers to address the issue. However, Congress has taken no formal action, and the agreement will not be renegotiated until 2026.

Why it matters: America’s foreign adversary has become a beneficiary of trade agreements designed to repress it. Efforts at competing with China are hindered because the U.S. continues to encourage and increase reliance on Mexican manufacturing.