The demand for imports from China to Mexico has doubled, compared to the same period in 2019. This surge in import bookings has been primarily seen in the past year, while import bookings from China to the U.S. have only increased by approximately 40%. This significant increase in imports from China to Mexico raises questions about its potential impact on the U.S. freight market.
According to the Inbound Ocean TEUs Indices (IOTI), which measure twenty-foot equivalent units on a 14-day rolling average, this surge in import bookings is a leading indicator of surface transportation demand. This trend was recently highlighted by FreightWaves’ Noi Mahoney, who analyzed data from Xeneta and reported on the significant growth in container shipments in this lane.
The reasoning behind this sharp increase in imports can be attributed to several factors. One of the main theories is the concept of nearshoring, which has gained attention in recent years due to growing geopolitical tensions, especially with China. It is not widely known that China is almost as dependent on the U.S. consumer as America is on China’s production. As American companies look to diversify their production, China is actively seeking solutions to this issue, and one of those solutions may be reflected in the import data.
The U.S. freight market has been consistently growing in all modes of transportation since the end of last winter. The number of TEUs clearing customs (CSTEU), loaded rail container volumes (ORAILL), and the national Outbound Tender Volume Index (OTVI) have all shown a steady increase. However, the exponential growth in imports from China to Mexico surpasses the organic growth of American imports.
One theory for this phenomenon is that China and its sourcing partners are avoiding tariffs by bringing goods into Mexico before shipping them across the border, effectively making them “Mexican” imports and circumventing tariffs. This will be difficult for the U.S. to detect and enforce. Another theory suggests that China is sending more raw materials to Mexico as it invests in the country’s manufacturing sector, anticipating that the U.S. will be more willing to engage in trade with its Southern neighbor.
If these theories hold true, then we can expect to see a continuous shift in the North American supply chain, with more freight coming through the Southern border. This trend is already evident in the import bookings into the Port of Los Angeles, which have increased by 40% annually, and in Long Beach, where import bookings have risen by 11%. The IOTI from China to Mexico has followed a similar trend to the import bookings in Los Angeles over the past year.
The markets of Laredo, Texas, and Tucson, Arizona, have seen the most significant growth in the U.S. over the past five years. Laredo’s tender volumes have increased by 137% compared to March 2019, and Tucson’s have risen by a staggering 237%. Both of these cities are home to major border crossing points, indicating the growing importance of the Southern border in domestic transportation.
While nearshoring alone cannot replace China, it is not the only solution. Whether it is nearshoring, tariff avoidance, or another factor entirely, the Southern border is becoming increasingly crucial for the U.S. transportation industry.
