Opinion | China’s pain on trade with the US will fast become Mexico, India and Southeast Asia’s gain

The impact of US tariffs on Chinese imports is already showing up in trade data, with Chinese manufacturers losing market share in top US sectors. American companies facing difficulties in China could look to India for opportunities instead

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Published: 3:00am, 20 May 2019Updated: 3:00am, 20 May 2019

China’s position as top US trade partner and largest source of American imports may be over as other economies gain from Beijing’s tariff troubles. Mexico and countries across Southeast Asia have already seen their percentage of US imports rise as China’s declines. This change will only accelerate as the trade war continues, and as of now there’s little reason to think it won’t go on for an extended period. If US President Donald Trump raises tariffs on all Chinese imports, as he’s threatened to do, bilateral trade may never be the same.

Shifting trends are already showing up in the trade data. While China continues to be a top source of US imports, sales in the first quarter of 2019 have dropped 14 per cent to US$106 billion from US$123 billion during the same three-month period last year, according to US Census data. This is despite the US dollar strengthening against the Chinese yuan, making Chinese imports even cheaper. Mexico, the No 2 source of US imports, had the largest quarterly gains.

Over the past decade, Chinese manufacturers have also lost market share in four out of its seven top US sectors, including computers, apparel, toys and furniture. Mexico’s share of the lucrative US computer segment grew to 32 per cent in 2018, from only 21 per cent in 2010. The recently negotiated US-Mexico-Canada trade agreement gives Mexican firms an even stronger advantage after Trump raised tariffs on Chinese imports.

Countries throughout Southeast Asia have also increased their market share in other top China categories. Vietnam has tripled its sales of apparel and textiles (non-wool or cotton) to nearly US$7 billion from US$2.25 billion in 2010. Taiwan, the Philippines, Thailand and Vietnam are also gaining on Chinese firms’ sales of computer accessories.

Chinese firms still account for half of all US imports of computer accessories, but other competitors are picking up significant market share. Collectively Taiwan, the Philippines, Thailand, Vietnam, and Mexico captured 28 per cent of this US import sector, up from 15 per cent at the beginning of the decade.

These increases occurred despite Trump abandoning the Trans-Pacific Partnership, an agreement meant to eliminate tariffs among participating countries, which would have accelerated imports from Vietnam even faster.