The US just imported its smallest share of Chinese goods in 17 years — and the big winners are Mexico and Vietnam

• The US is importing fewer goods from China, as supply chains shift away from the East Asian country.
• Goods imported from China into the US made up 14.6% of all imports in the 12 months through July, per a Bloomberg analysis.
• This is the lowest share of Chinese goods imported to the US since 2006.

The US has been importing a smaller proportion of goods from China — indicating a shift in global supply chains as companies diversify their manufacturing bases.

Goods imported from China into the US made up 14.6% of all shipments in the 12 months through July, according to Bloomberg's analysis of data from the US Census Department, published on Wednesday.

The country's share in the imports pie is down from a peak of 21.8% in the 12 months through March 2018, before then-US President Donald Trump intensified a trade war against China. It's also the lowest percentage of US imports from China since 2006, per Bloomberg's records.

The data followed years of supply chain disruptions — including heightened Washington-Beijing geopolitical tensions, draconian COVID-19 pandemic lockdowns in China, and rising wages in China that make manufacturing costlier.

Now, Mexico and Vietnam appear to be taking away some of China's share.

Mexico's share of goods imported into the US hit a record high of 15% in the 12 months through July, while Vietnam's share was 3.7%, just off a record high reached in 2022, per Bloomberg. 

In fact, Mexico edged out Canada as the US' top trading partner at the start of 2023.

At almost 16% share of the total trade, Mexico remained the US' top trading partner in July. The total trade between the two countries stood at nearly $462 billion, according to data from the Census Bureau. Canada and China were the US' second and third trading partners, respectively.

"Mexico's gains mirror its rise in manufacturing, a key component of goods moving between it and the US," Luis Torres, a senior business economist at the Federal Reserve Bank of Dallas, wrote in a July 11 post.

Mexico also has a geographical advantage as an alternative to China in the trend for manufacturers to "nearshore" their operations to the US, a large consumer market, Torres added. 

"Nearshoring" refers to sourcing or producing goods from a nearby country.

Even Chinese manufacturers have been moving to Mexico to serve their US customers amid tensions between Washington and Beijing. They include TV set-maker Hisense and car parts makers like Minth Group and Binzhou Bohai Piston Co. 

Meanwhile, other up-and-coming manufacturing hubs like Vietnam have also been enticing manufacturers looking to shift some output away from China.