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Mexico has overtaken China as the leading source of goods imported to the U.S.

LEILA FADEL, HOST:

For the first time in more than two decades, Mexico has become the top source of goods imported to the U.S., beating out China, according to new government data. Joining us now to discuss all this is Mark Zandi, Moody's Analytics' chief economist. Good morning.

MARK ZANDI: Good morning, Leila.

FADEL: So, Mark, what's behind this shift that has Americans buying more stuff from Mexico over China?

ZANDI: A bunch of stuff. I think I'd put at the top of the list the very vexed relationship between China and the United States, dating back all the way to President Trump when he first imposed tariffs on China. That was back in 2018. And of course, tariffs mean higher prices for the goods that we're importing. Consumers pull back on spending on those items because of the higher cost. Pandemic also has played a role. It kind of laid bare the fact that our supply chains aren't very resilient, and so companies have worked pretty hard to bring those supply chains back closer to home. And of course, Mexico is a lot closer than China.

And then the pandemic also scrambled our spending patterns. We spent a lot of money on stuff back - early on in the pandemic when we were sheltering in place. You know, that was stuff from China and everywhere else. But more recently, we've stopped buying those things because we're out traveling, going to restaurants, going to ball games. And China's gotten hurt more because they produce a lot of the consumer goods that we bought during the teeth of the pandemic but aren't buying now.

FADEL: OK, so a lot of layers there, but it sounds like one of the chief reasons is this difficult relationship between the U.S. and China. So what does this say about that relationship going forward?

ZANDI: Well, I don't think there's any way to take this back. If there's one thing that Democrats and Republicans can agree on, it's that they're uncomfortable with the relationship with China. You know, President Trump imposed the tariffs, President Biden continued with those. And, of course, President Trump is talking about even higher tariffs. And the trade relationship is only part of the problems that people have with China related to cybersecurity and intellectual property rights and access to markets. So the whole relationship is taking on its own dynamic at this point to the point that we're all pulling apart, the so-called decoupling. So I really don't see our relationship with China moving in a direction where it means more trade. So it feels like we're going to be importing less from China going forward.

FADEL: What does that mean for China?

ZANDI: It's going to be tough on China. You know, the U.S. and China are big trading partners. We export and import a lot of stuff, but as a share of our economy, trade is actually pretty small. You know, we are more domestically oriented. It's all about the American consumer. That is what drives the economic train here. But in China, trade is really important to that economy. It's a big part of their economy. So, you know, the fact that we're pulling away from each other is diminishing both our economies, but it's doing a lot more damage to the Chinese economy.

FADEL: So this government data that we're referencing here, I mean, how accurate of a picture is it?

ZANDI: Yeah, good point, Leila. I mean, you know, all data has its problems and its warts. And, you know, clearly, because of the tariffs, you know, the Chinese are trying to work around that, so they're shipping goods to other parts of the world that find their way into the U.S. and aren't counted as imports from China. But, you know, despite the data problems, the message is clear here. We're going to be importing less from China going forward. We're decoupling.

FADEL: That's Mark Zandi, chief economist of Moody's Analytics. Thank you, Mark.

ZANDI: Thank you.

(SOUNDBITE OF GIA MARGARET'S "3 MOVEMENTS") Transcript provided by NPR, Copyright NPR.

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