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Mexico benefits from a trade war with China

May 22, 2019

A trade war between the United States and China is reported to be a windfall for Mexico.

Many have moved to Mexico to avoid U.S. tariffs on chinese-made goods.

As the United States looks to win a trade war, Mexico has benefited unexpectedly, with many manufacturers shifting production locations or finding new resources to avoid tariffs.

To supply the American restaurant plastic tableware for the benefit of Chinese manufacturers taizhou fu ling plastic company (Fuling Global Inc), for example, in trump the President on all imports from China (including paper products) after the tariffs, the company to find another way, Monterrey in Mexico is set up a factory at a cost of $4 million, from Mexico to the United States soon carry millions of tubes of paper straw.

Gilbert Lee, taizhou fuling's chief financial officer, said the company was avoiding the tariffs to make up for higher wages at its Mexican plant with lower shipping costs.

Mexico is a very logical and advantageous place for them.

Fuling is not the only Chinese manufacturer to switch production to Mexico.

Mexican exports to the United States have soared, largely because of tariffs on Chinese goods.

U.S. imports from Mexico rose 10 percent to $350 billion in 2018, the fastest pace in seven years, widening the U.S. trade deficit with Mexico by 15 percent to more than $80 billion, while imports from China slowed by a third.

In addition to the tariff boost for Mexican exports, some companies have increased orders to Mexico, fearing that trump is threatening to dismantle the north American free trade agreement.

Trump later signed a renegotiated agreement in November.

Dollar volatility and the trump administration's steel tariffs are also taking their toll.

Alan Russell, a texas-based consultant with Tecma Group, which helps companies set up factories in Mexico, says he was surprised to see the highest level of interest from American companies in his 25-year career.

Jorge Guajardo, Mexico's former ambassador to China, said most of the goods diverted from China to Mexico were concentrated in low-value-added, easily replaceable goods.

Taskmaster Components, a Texan firm that has been importing large wheels and tyres from China for 20 years, wants to invest in factories in Mexico or elsewhere, not in America, because of the tariffs.

Because of the remaining American manufacturers, there is no willing partner.

Mexico's proximity to the United States, its convenient ports and an educated workforce make it more attractive.

Mexico's exports to the us more than doubled after the us imposed tariffs on its metal minerals and processed products, while China's fell by a quarter.

Mexican sales to the United States rose 20 percent.

In addition, the trade war has made the U.S. more dependent on Mexican agricultural products, and Mexico is already the largest importer of U.S. vegetables such as broccoli, carrots and Onions.

For example, imports of peeled garlic from China fell by nearly a quarter, while exports from Mexico increased 54 percent, benefiting even small Mexican businesses.

After the U.S. imposed a 10% tariff on Chinese silk, Mexican exports to the U.S. surged to $1.6 million last year from just $5,500 in 2017.

Imports of Chinese knitwear and knitted fabrics fell by $3 million, about the same amount as imports from Mexico.

In the automotive supply chain, U.S. imports of gasoline engines from Mexico rose 17 percent to $32.6 billion, while imports from China, Germany and Canada fell.