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Near-sourcing trend boosts US trade with Mexico and Canada while China lags · EMSNow

Near-sourcing trend boosts US trade with Mexico and Canada while China lags · EMSNow

We’ve been saying for years that near-sourcing is real and that it would mitigate some of the negative economic impact of the Federal Reserve’s interest rate hikes.

SOURCE: ITR Economics

According to the data, this near-sourcing trend is in full swing. If you asked a random person on the street to name the country “where we get most of our stuff from,” their answer would probably be “China,” and they would be wrong.

We import more from Mexico than from China, and we import almost as much from Canada as from China.

The graphic shows annual US imports from the three respective countries in billions of US dollars.

  • U.S. imports from China rebounded after a tariff and COVID-related decline, but then fell sharply again and are now hovering just above the COVID trough.
  • Imports from Canada and Mexico fully recovered after the COVID-19 crisis and significantly exceeded pre-COVID-19 levels. Both are currently “above trend” compared to their pre-COVID-19 trajectory.
  • US imports from Mexico continue to rise sharply.
  • Imports from Canada have leveled off, at least for the time being, but tend to be well above (23.8%) the last 10-year average.

From a Canadian perspective, the dynamics have also changed.

Canada imports billions of Canadian dollars

  • In contrast to the country’s imports from China, Canada’s imports from the United States and Mexico rose sharply following the COVID-19 crisis.
  • Canada’s imports from China have declined in recent years.
  • Imports from China are below trend.

Meanwhile, trade relations have hardly changed for the Mexican economy.

Mexico imports billions of dollars

  • Mexican imports from both the United States and China are generally increasing, while imports from Canada remain relatively flat, as has been the general trend since the early 2010s.

For your US company, the near-sourcing trend generally means increased manufacturing options in the US. You may also want to explore the options in Mexico.

To learn more about how you can best position your business to benefit from these near-sourcing opportunities, we have a webinar on this topic for our Insider™ subscribers.