The US-China trade war is pushing trade South

China-Mexico trade routes are attracting global shippers as Mexico overtakes China as the US’s largest exporter, Bloomberg reports. “It is probably the fastest growing trade on planet Earth right now,” says chief analyst at Oslo-based trade analyst firm Xeneta Peter Sand. Three new carriers were added this month to the trans-Pacific sea lanes that deliver electronics, auto parts, and machinery to Mexican ports. Shipping liners CMA CGM, MSC, and Orient Overseas Container Line all launched new routes between China and Mexico this month.

Circumventing US tariffs: Shipping between the two countries spiked in 2022 amid growing US-China tensions, with manufacturers focusing on final production in Mexico. US tariffs have doubled rates on Chinese-made semiconductors and marked up EVs by 102.5%. US tariffs on Chinese-made goods may be forcing imports to go via Mexico as a way of relabeling their origin.

The fallout: Ocean shipping rates from Asia to Mexico spiked 57% m-o-m to around USD 3.3k per 40-foot container last month, its highest rate since May last year, Bloomberg notes, citing Eternity Group Mexico’s EAX Index. Mexico’s Pacific ports, including Manzanillo and Lazaro Cardenas, are experiencing trade bottlenecks as activity continues to rise.

BACKGROUND- The White House launched a raft of tariff increases on USD 18 bn worth of Chinese imports last week that will begin taking effect partially on August 1. China struck back this week with the Commerce Ministry restricting US-based General Atomic Aeronautical Systems and General Dynamic Land Systems from import, export, and investment activities in China.