Board of Governors of the Federal Reserve System

Figure 1. U.S.—Mexican Trade

Figure 1 illustrates trade patterns between the U.S. and Mexico, demonstrating increased trade between the two countries in the past five years.

Figure (a), titled “U.S. Goods Imports by Country”, shows U.S. imports from Canada, China, and Mexico from 2014:Q1 to 2025:Q1, measured in billions of U.S. dollars (annualized). The y-axis ranges from 200 to 700 billion dollars. There is a vertical line through June 2018 with the label “Start of the 2018-19 tariff hikes.” The solid green line is imports from Mexico. The Mexico line begins at roughly 300 billion dollars in 2014 and shows the most consistent upward trajectory. It remains relatively flat through 2019 around 400 billion, then dips to about 220 billion in 2020 before quickly rebounding. After 2020, imports from Mexico experience steady growth, surpassing both Canada and China to reach approximately 600 billion dollars by 2024, making it the highest among the three countries by the end of the period. The red dashed line represents U.S. imports from China. The line starts at about 480 billion dollars in 2014 and fluctuates in the 480-580 billion range through 2018. After the tariff period begins, it drops sharply to around 350 billion by 2020. It then recovers and peaks near 640 billion in early 2022, before declining again to approximately 480 billion by 2024. The China line is higher than Mexico and Canada until mid-2022, when it’s surpassed by both. The dotted black line represents U.S. imports from Canada. The line begins at approximately 400 billion dollars in 2014 and remains relatively stable around 320-370 billion through 2019. After the same 2020 decrease and as Mexico, imports from Canada grow to about 500 billion dollars by the start of 2022, where they stay through 2024.

Figure (b), titled “Mexican Exports to the U.S.” shows U.S. imports from Mexico from 2016 to 2024, indexed to 2018:Q3. The y-axis ranges from 50 to 150. There is a vertical line through June 2018 with the label “Start of the 2018-19 tariff hikes.” Two lines represent different categories of Mexican goods: those subject to U.S. tariffs on China (China Tariffed) and those not (China Non-Tariffed). The “China Tariffed” line, dark green and solid, begins at approximately 80 in 2016 and trends upward, reaching 100 at baseline. The line remains around 100 until it drops to a low of about 65 in 2020. After this dip, it shows a strong and steady recovery, climbing continuously to reach approximately 150 by 2024—the highest level in the entire period. The “China Non-Tariffed” line, black dashed, starts at about 75 in 2016 and rises through 2018, reaching around 100 at the baseline. The line also decreases to about 65 in 2020. It then recovers and grows more gradually, reaching a peak of around 125 by 2022, before showing a slight decline to approximately 120 by the end of 2024. Overall, Mexico exports goods subject to U.S. tariffs on China more that non-tariffed goods.

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Figure 2. China and Mexico

Figure 2 illustrates trade patterns between China and Mexico, demonstrating increased trade between the two countries over the last 10 years.

Figure (a), titled “Cumulative Chinese FDI to Mexico”, shows the growth of Chinese greenfield foreign direct investment in Mexico from 2014 to 2024, measured in billions of U.S. dollars. The data are annual. The y-axis ranges from 0 to 8 billion dollars. The data is presented as a stacked area chart with three sectors: auto and auto parts, electronics, and other manufacturing. Overall, cumulative Chinese FDI to Mexico remains below 2 billion dollars through 2020, then accelerates sharply, reaching approximately 7 billion dollars by 2024, with all three sectors contributing to this rapid growth. The “Other Manufacturing” layer is the blue layer at the bottom. The layer begins near zero in 2014 and shows gradual growth through 2020, reaching approximately 1 billion dollars. From 2020 to 2024, it accelerates significantly, expanding to approximately 3 billion dollars by 2024. The “Electronics” area, the light purple layer, remains near zero until 2021. Starting in 2021, it begins to grow, accounting for approximately 2 billion dollars in cumulative FDI by 2024. The “Auto and Auto Parts”, the orange top layer, starts near zero in 2014 and remains relatively flat and near-zero through mid-2018, when it increases to about 1 billion dollars. at less than 1 billion dollars. Beginning around 2022, it increases, reaching approximately 2 billion dollars by 2024.

Figure (b), titled “Real Mexican Imports from China”, shows Mexican imports from China by sector from 2017 to 2024, measured in billions of U.S. dollars. The y-axis ranges from 0 to 150 billion dollars. The data is presented as a stacked area chart with four sectors: auto and auto parts, electronics, other manufacturing, and other. Overall, total Mexican imports from China grow from approximately 80 billion dollars in 2017 to about 125 billion dollars by 2024, with Other Manufacturing and Electronics driving most of the growth. The “Other” layer is light green and at the bottom. The layer begins at approximately 5 billion dollars in 2017 and remains relatively stable and flat throughout the entire period, reaching about 15 billion dollars by 2024. The “Other Manufacturing” layer is blue and second from the bottom. It starts at approximately 15 billion dollars in 2017 and shows steady, gradual growth throughout the period. It expands consistently to reach approximately 45 billion dollars by 2024, representing the second largest portion of total growth. The “Electronics” layer is light purple and the largest of the four layers. It begins at approximately 50 billion dollars in 2017 and shows moderate fluctuations through 2020. Starting around 2021, it begins to increase more noticeably, growing to about 60 billion dollars in 2024. The “Auto and Auto Parts” layer is the top orange layer. It starts at less than 5 billion dollars in 2017 and remains relatively flat until 2021, when it begins to show modest growth. The layer accounts for approximately 5 billion dollars by 2024.

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Figure 3. Decomposition of Increase in Mexican Exports to the U.S.

This bar chart shows the contribution of trade diversion, trend growth, and other factors to the growth in Mexico’s exports to the U.S. from 2014-2017 to 2021-2024. It is a single bar chart split into three sections. The y-axis ranges from 0 to 125 billion U.S. dollars, the total growth between the two periods. Trade diversion, to top green bar, contributes the most to export growth. It accounts for about 65 billion dollars, or 53 percent, of total growth. Trend, the middle section in light gray, accounts for about 45 billion dollars, or 35 percent, of total growth. Other factors, the bottom section in dark gray, accounts for about 15 billion dollars, or 12 percent, of total growth.

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Figure 4. Decomposition of Increase in Mexican Exports to the U.S.

This bar chart shows the contributions to the growth in Mexico’s exports to the U.S. from 2014-2017 to 2021-2024. Total growth is decomposed into of China’s transshipment, China’s production in Mexico, other trade diversion, trend growth, and other factors. It is a single bar chart split into five sections. The y-axis ranges from 0 to 125 billion U.S. dollars, the total growth between the two periods. Total trade diversion, to top green bar, contributes the most to export growth. It accounts for about 65 billion dollars, or 53 percent, of total growth. Total trade diversion is split into three parts: China’s transshipment, China’s production in Mexico, and other trade diversion. China’s transshipment, the dark red dashed area, accounts for 1 billion dollars, or 1 percent, of total growth. China’s production in Mexico, the orange dashed area, contributes about 17 billion dollars, or 14 percent, to total growth. Other trade diversion, the solid green section, represents about 47 billion dollars, or 38 percent, of growth. Trend, the middle section in light gray, accounts for about 45 billion dollars, or 35 percent, of total growth. Other factors, the bottom section in dark gray, accounts for about 15 billion dollars, or 12 percent, of total growth.

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Figure 5. Contributions to the Growth in Mexico’s Manufacturing Exports to the U.S.

This bar chart shows the contributions of Chinese inputs and Mexican value-added to growth in Mexico’s manufacturing exports to the U.S. The y-axis ranges from 0 to 20 percent contribution. The two bars, representing growth from the previous two years, are split into the two components. Mexican value added, the green section of the bars, accounts for most of the export growth in both periods. Its contribution grew from about 5 percent to 15 percent. The contribution Chinese inputs, the red section of the bars, grew from about 2 percent to about 3 percent.

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Figure 6. AI Growth

This figure displays growth in Mexico’s electronics sector.

Figure (a), titled “FDI Growth to Mexico in Electronics”, shows the percent contributions of four region to growth in greenfield foreign direction investment to Mexico in electronics from 2014-2017 to 2021-2024. The y-axis ranges from 0 to 40 percent. The four regions are China (red), Asia ex. China (yellow), the U.S. (blue), and the rest of the world (purple). Asia ex. China contributed the most to FDI growth at about 35 percent, followed by China at about 28 percent. The rest of the world accounts for approximately 20 percent of growth and the U.S. represents around 17 percent.

Figure (b), titled “Real U.S. AI-related Imports”, illustrates the U.S.’s AI-related imports from Mexico, Taiwan, and Vietnam from 2015:Q2 to 2025:Q3. The y-axis ranges from 0 to 200 and is measured in billions of real U.S. dollars (annualized). Mexico, the solid green line, starts at about 25 billion dollars in 2015 and gradually rises to approximately 50 billion dollars by the end of 2022. From 2015 to 2022, Mexico accounts for more of the U.S.’s AI imports. After a slight dip in 2023, the line sharply increases to about 125 billion dollars by 2025. Taiwan, the dashed blue line, is near zero from 2015 to mid-2018, when the line gradually increases to about 50 billion dollars by 2023. Then the line drastically increases and surpasses Mexico in 2025 to reach about 180 billion dollars in 2025. Vietnam, the dotted orange line, remains relatively flat near zero from 2015 through 2023, then increases slightly to 25 billion dollars by 2025.

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