U.S. trade figures are a normally dry affair, but the latest release contained a few surprises.

Driving the news: The vast trade deficit rose modestly in December, government data showed on Wednesday, but contracted by nearly 19 percent for the full year, after hitting a record in 2022.

• America imported slightly less than normal, which added to growth and reflected shifting consumer tastes and business inventories.
• More importantly, Mexico officially displaced China as America’s largest bilateral trading partner last year, a development Axios’ Emily Peck wrote about in July 2023. The U.S. imported nearly $476 billion from Mexico, and shipped roughly $323 billion to its southern neighbor.
• Meanwhile, strained Sino-American relations, and an ongoing trade war, narrowed the still-yawning US-China trade deficit.

Why it matters: The U.S.-Mexico relationship is often viewed through the far more contentious lens of immigration politics. A worsening migrant crisis has upended Washington, and placed strains on big cities grappling with a massive influx of refugees from Central and South America.

• But the data clearly show how, despite deteriorating conditions south of the border, the U.S. and Mexico have hundreds of billions of reasons to remain on friendly terms.

Context: Nationalism, a fractured global supply chain and intensifying conflicts abroad are forcing companies to rethink where they manufacture their products.

• One entrepreneur told The New York Times he resigned from Caterpillar to concentrate his own efforts on exploiting growing ties between U.S. and Mexican industries.
• And during his tenure, former President Trump forced a renegotiation of NAFTA, which has played a pivotal role in the economic activity boost south of the border.

For the world's largest importer of goods, things aren't as simple as being "made in China" anymore. Together, American consumers buy from three major foreign sources: Mexico, China and Canada.

• The U.S. absorbs more than $3 trillion worth of international goods a year, according to U.S. Trade Representative data, with those 3 countries accounting for more than a third of that total.

What they're saying: With geopolitics increasingly unpredictable, Mexico is preferable to China for a few reasons, Alfonso de los Ríos, CEO of Nowports, a digital freight forwarding startup, told Axios in a recent interview.

• "When U.S. companies are looking for new suppliers in Latin America they are looking for resiliency and can't be affected by geopolitics or weather."

Yes but: The U.S.- China relationship is still very important— especially for companies that both sell into those markets and source from them (think Apple and Starbucks).

• And, as Council of Foreign Relations senior fellow Brad Setser notes on X, one wrinkle from the U.S.-China trade kerfuffle is that voracious American consumers now gorge themselves on imports from other Asian economies.

The bottom line: US-Mexico relations hinge on a lot more than fiery border politics.