Principally, US imports from Mexico exceeded imports from China for the first time in 20 years. The former grew by nearly 5% to $480bn in 2023, while those from China shrank by just over 22%. In consequence, the US trade deficit with China has fallen by nearly 27% to $279.4bn, while the overall US trade deficit fell 11.8% to $1.15trn.

A closer look at US imports over time suggests there are two distinct phases to the country’s trading relationship with China.

Initially, the proportion of US imports from China increased steadily from the early 1990s – from 4.8% in 1992 to a peak of around 22% in 2017, with Chinese imports receiving a big boost from China’s accession to the World Trade Organization in 2001. However, this trend reversed abruptly from 2018, with China accounting for just 14.1% of the US’ imports by 2023. This downturn started with the increase in tariffs imposed at the beginning of the Donald Trump administration and that continued into Joe Biden’s presidency, and it was also partially a consequence of the Covid-19 pandemic.

It's also worth highlighting a discrepancy between official US figures showing US imports from China and official Chinese figures setting out its exports to the US. Historically, China has systematically underestimated its exports to the US, partly due to China classifying many goods sent to the US via Hong Kong as exports to Hong Kong, whereas the US counted them as imports from China. However, the introduction of US tariffs on China has resulted in the US undercounting imports from China. This could be due to two factors, with the first being final assembly lines moving from China to Southeast Asian countries such as Vietnam, Malaysia and Thailand.

The second phase was marked by Chinese firms making extensive use of the ‘de minimis’ exception. This allows packages containing goods worth under $800 per person per day to enter the US tariff-free. Shipments under the ‘de minimis’ rule are not counted in the official US trade data, so the real figure for imports from China has been underreported in recent years. This is evident from the chart below.

US imports from China vs China’s exports to the US

Many countries do not apply a de minimis threshold and, if they do, their threshold is significantly lower than the US’. In fact, the US increased its threshold from $200 in 2016, which, coupled with the imposition of higher tariffs since 2018, has resulted in a surge of use of the de minimis channel – both in overall value and volume. As we can see in the chart below, volumes rose to a billion packages in 2023, up a staggering 45.9% over the year. 

US imports via the de minimis channel 

The US Congress is concerned about the recent increase in these imports on domestic industries, leading it to re-examine the current ‘de minimis’ rules and propose a number of bills that could result in amendments to existing legislation. This could include a potential reduction or elimination of the threshold value, prohibition of shipments from certain countries (including China), requirements for additional documentation and new fines for non-compliance. 

Global trade volumes increased 1% month-on-month in December, despite the ongoing disruption in the Red Sea, after falling by 1.3% in November. Trade volumes remain below their long-term trend level, however. Less volatile quarterly data suggests that global trade momentum turned slightly positive in Q4 of 2023, rising by 0.5% quarter-on-quarter after falling by 0.6% in Q3. It’s expected to rise by another 0.8% in Q1 of 2024.

The improvement in trade in December was broad-based – trade among advanced economies rose by 1.3% over the month thanks to significant increases on the part of Japan, the US, other advanced economies and emerging Asia. Other bright spots included China, Africa, the Middle East and Latin America.

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