Global supply-chain diversification to Mexico, Vietnam and India still runs through China

Amid reports that Mexico could be near a deal to reduce Donald Trump’s tariffs, we’re revisiting the “connector economy” phenomenon. For corporations, this is also known as “China +1,” where inputs from China are used in Mexican and Vietnamese production of US-bound goods.

The US is buying far fewer goods from China than it did before trade tensions escalated in Trump’s first term. Meanwhile, Mexico’s share of US imports has steadily climbed. Vietnam’s share has increased particularly strongly in Trump’s second term; India is also gradually taking on a greater role in “China +1” strategies.

For Mexico and India, their change in imports from China since 2017 is striking – and intermediate goods (i.e. production inputs used to manufacture final goods) dominated in both cases. This phenomenon brings investment, manufacturing capacity and jobs – but also greater exposure to Chinese upstream supply and US final demand (and political pressures).