The Great Reallocation: China exposure rerouted through Mexico

The finding

Tariff walls redrew the trade map faster than they redrew the dependency map, so Chinese content persists and re-routes through Mexico even as China's direct US-import share falls. The surface reallocation is real, and the report concedes it in full. A product-level study of more than 5,300 import categories by Laura Alfaro and Davin Chor shows China's share of US imports falling from about 21 percent in 2017 to 9 percent over the first eight months of 2025. Mexico overtook China as the largest source of US goods imports in 2023 and holds the top spot at 16.9 percent of US goods imports year-to-date through April 2026, with China fourth at 7.2 percent, on Census data.

The measurement that matters most runs against the headline. Computed from the OECD's Trade in Value Added database, the 2025 edition covering 2016 through 2022, the share of Mexican gross exports that originates as Chinese value added rose from 5.1 percent in 2016 to 6.7 percent in 2022. Over the same six years, China's direct share of US imports fell about 0.86 points per year. The divergence between the two runs at 1.18 percentage points per year, and the probability that it is actually zero or negative is below one in ten thousand. The rise is broad: Chinese value added in Mexican motor-vehicle output grew about 0.55 points per year, in electronics about 0.39 points, in manufacturing overall about 0.44 points.

The conduit's intake pipe is the second piece of hard evidence. Mexico's imports from China rose from $74 billion in 2017 to a record of about $133 billion in 2025, making China Mexico's second-largest supplier at about 21 percent of its imports, while Mexico sells China only about $10 billion a year. Mexican imports of Chinese motor-vehicle parts are up 93.5 percent since 2018, and transformers and related electrical goods up 65 percent.

The report also corrects a figure it found circulating in a form the data does not support. A Brookings analysis is often summarized as about a third of Mexico's exports being Chinese value added; on the gross-exports basis that phrasing implies, the true figure is about 6.7 percent. The one-third figure lives one measure over, as China's share of the foreign content of Mexico's electronics exports specifically.

Policy has started chasing the content. On July 1 the United States formally declined to renew the USMCA and converted it into an annual review with a 2036 expiry backstop, with automotive rules of origin and transshipment among the named agenda items. On July 24 the flat Section 122 tariff expired on schedule and was replaced the same morning by two-tier duties under Section 301: 12.5 percent on China and Vietnam, 10 percent on Mexico, and nothing on Mexican goods that qualify under the USMCA.

The numbers that carry it

• 6.7 percentChinese value added as a share of Mexican gross exports in 2022, up from 5.1 percent in 2016, computed from the OECD Trade in Value Added database, 2025 edition. As of publication, July 2026.
• 1.18 percentage points a yearThe measured divergence between China's falling direct share of US imports and its rising value-added share inside Mexican exports over 2016 to 2022. As of publication, July 2026.
• About $133 billionMexico's record purchases of Chinese goods in 2025, against roughly $10 billion sold back, making China Mexico's second-largest supplier at about 21 percent of its imports.
• 7.54 percentChina's share of US goods imports in May 2026, up from a 6.59 percent April low, the first year-over-year increase in the sample.
• 18.2 percentShare of Vietnam's US-bound exports in 2021 measured as rerouted Chinese products at country and product level, against 1.8 percent at the firm level, in a Harvard Business School working paper. As of publication, July 2026.

What would change our mind

A signed USMCA content-and-transshipment mechanism that bites, followed by a sustained rollover in Mexico's imports from China and a falling Chinese value-added share in the next data vintage. That combination would mean the dependency map is finally catching up to the trade map.

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Published July 2026. Figures are as of publication and are not updated on this page.