In the first five months of 2023, China’s position as the top exporter to the United States was challenged, as its share of total US imports dropped to a record low of 13.4%. This marks the first time in 15 years that China has lost its leading position to other countries, particularly Mexico and Canada.
According to the latest data from the US Department of Commerce, US imports of Chinese goods between January and May 2023 witnessed a significant decline of approximately 25%, totaling $169 billion compared to the same period last year.
This decline in Chinese imports led to a decrease in China’s share of total US imports, reaching its lowest level in 19 years. The 3.3 percentage point decrease from the same period in 2022 is significant. Notably, imports of semiconductor products from China experienced a substantial drop of up to 50%.
Conversely, US imports from Mexico skyrocketed to $195 billion, setting a new record for the first five months of the year. Additionally, imports from Canada increased to $176 billion, solidifying its position as a leading exporter to the US.
Simultaneously, Southeast Asian countries have been strengthening their export presence in the US market. US imports from the Association of Southeast Asian Nations (ASEAN) surged to $124 billion in the first five months of 2023, representing the second-highest figure recorded for this period. The proportion of ASEAN goods in total US imports has doubled over the past decade.
However, US exports to China remained relatively stable, reaching approximately $62 billion in the first five months of the year. Despite China maintaining its status as the third-largest export market for the US, the share of US goods in China’s total imports has decreased to 7.5%. This figure is down from the peak of 9% in 2020 and is now only half the share of Mexico and Canada.
China’s ascent as the top exporter to the US began in 2009, surpassing Canada. Leveraging its low production costs and focused supply chain, China dominated global trade when the US manufacturing sector faced challenges during the economic recession triggered by the financial crisis. Over the past 15 years, China’s nominal gross domestic product (GDP) nearly quadrupled, and its total export volume more than doubled.
However, China’s share of total US imports started to decline during the Trump administration, following a peak of around 20% from 2015 to 2018. The administration implemented substantial tariffs on approximately $370 billion worth of Chinese imports to revitalize domestic manufacturing.
Under the Biden administration, these tariffs remain in place, and efforts are underway to reduce reliance on China, particularly in sectors such as advanced semiconductors and telecommunications equipment, citing national security concerns. President Biden has also emphasized the need for supply chain restructuring in critical sectors, including chips and batteries.
This shifting landscape has led US companies to reevaluate their production networks. For instance, Apple has actively encouraged its suppliers to diversify manufacturing operations by shifting away from China to Southeast Asian countries and India. Similarly, fashion retailer Gap has increased production in Mexico and Central America.
While reducing dependence on China may result in increased consumer prices, lawmakers from both parties support minimizing risks associated with China. The shift toward friendly countries, known as friendshoring, has gained significant momentum.
“Putting efficiency and cost above all else has made supply chains vulnerable and exposed to great risks,” said US Trade Representative Katherine Tai in June, highlighting the importance of diversification.
Meanwhile, China has redirected its exports to Southeast Asian countries. Although exports to the US have decreased by 17% in the first half of 2023 compared to the same period last year, China’s exports to ASEAN have increased by 2%. Observers suggest that Chinese exporters are shifting production to Southeast Asia for processing before exporting to the US and other countries.
As the dynamics of global trade continue to evolve, the declining dominance of China as the top exporter to the US has significant implications. The rise of Mexico, Canada, and Southeast Asian countries reflects a diversification strategy among US importers and highlights the importance of resilient and adaptable supply chains in an ever-changing market.