China-Mexico relationship reflects increasingly entwined manufacturing

As Mexico starts talks with Donald Trump’s administration to review the USMCA trade agreement, economic ties with China are in focus. As China-Mexico bilateral flows have grown, the relationship increasingly touches on the most politically sensitive segments of North American manufacturing.

These charts track the rise of “intermediate goods” as the growth driver of China’s exports to Mexico. This category refers to inputs that are used in the production of other goods or services — raw materials, components and semi-finished goods — and is a key indicator of how a “connector economy” changes when direct China-US shipments face more barriers. We’ve previously focused on ASEAN nations’ connector role, but the term can be applied to Mexico as well.

President Trump renegotiated the former NAFTA in his first term, and the new USMCA deal took effect in July 2020 — in time for the post-pandemic trade rebound. This acceleration is clearly visible in our first chart, where Chinese exports started rapidly outpacing imports from Mexico in 2021.

Our second chart compares two categories of Chinese exports to Mexico: key “core industrial intermediate goods” sectors versus finished capital goods from Chinese factories. The intermediates category has had a long-term growing share while capital goods stagnated — suggesting Mexico matters more to China as a production node (embedding Chinese-made inputs in the North American manufacturing ecosystem) than as an end market.

The automotive sector has been a particular focus for Trump, and is a key export industry in Mexico. As our third chart shows, “manufacturing-linked intermediates” — the category that includes auto parts — surged after 2021.

Mexico’s exports to China are concentrated in raw materials, as our final chart shows — particularly copper and precious metals. Manufactured goods are also important, however — including medical devices and chips. Mexico also ships a notable sum of auto parts to China as well as the US.

Mexico and China are planning their own rounds of trade talks this year after China described Mexico’s December tariffs on Asian countries as an investment barrier. President Claudia Sheinbaum must balance this relationship ahead of the USMCA review — with US officials emphasizing reducing dependence on imports from outside the region, strengthening rules of origin, and enhancing supply-chain security within North America.