“Logistics Pulse” is your cheat sheet and to-do list for everything about trade, the supply chain and logistics. We dive deep into the latest news headlines and industry trends and equip you only with actionable insights you can use to improve your business—no matter your industry or role in the supply chain. Presented by Mothership.

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Global trade patterns and geopolitical norms are changing faster than ever. Mexico recently beat out China as the top trading partner for goods to the U.S. We look into how Mexico overtook China in trade, how politics has impacted businesses around the world and what shippers, carriers and others in the logistics industry should know to take advantage of new opportunities.

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We also explain exactly how businesses have future-proofed their businesses in response to the quick and frequent changes in world trade and politics. We dig into how nearshoring in Mexico really works, whether it can work long-term and why companies outside of China, Mexico and the U.S. are searching for new suppliers and trade partners to protect their bottom lines.

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How global trade impacts businesses in the U.S. and abroad

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Host 1  00:00

Hey, everyone. This time we're tackling some interesting shifts in global trade.

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Host 2  00:03

Oh yeah, things are changing faster than ever.

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Host 1  00:05

We're going to explore how the map of global trade is basically being totally redrawn.

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Host 2  00:10

Right.

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Host 1  00:11

And we've got some awesome insights to help us unpack all of this.

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Host 1  00:31

We're looking at the McKinsey global trade report, their latest 2025 update. We'll uncover how these changes could directly impact your business. For example, did you know that Mexico just leapfrogged China as the top U.S. goods supplier?

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Host 2  00:45

Oh, wow! Really?

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Host 1  00:46

Yeah, pretty wild, huh?

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Host 2  00:47

Yeah, I hadn't heard that.

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Host 1  00:48

We'll break down what's behind that and what it means for you.

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Host 2  00:50

Well, what's fascinating to me is just how interconnected global trade really is. You know, the report points out that every single region on Earth relies on imports for at least 25% of its consumption.

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Host 1  01:01

Wow.

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Host 2  01:02

Of certain vital things, whether it's resources, finished goods or even services, we're all way more reliant on each other than we often realize.

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Host 1  01:10

That's so true. It's like a giant, intricate web, isn't it?

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Host 2  01:12

Right.

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Host 1  01:13

And sometimes those connections aren't so obvious.

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Host 2  01:15

Right.

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Host 1  01:15

Like the U.S. is actually a net exporter of non-fuel minerals. You'd think they'd be pretty self sufficient, right?

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Host 2  01:20

You would think.

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Host 1  01:21

But they still have to import a ton of critical minerals, those rare earth metals everyone's talking about, for instance.

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Host 2  01:25

Absolutely. You hit the nail on the head there. The U.S. critical minerals list actually has a whopping 50 minerals on it.

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Host 1  01:32

Wow. 

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Host 2  01:32

And for about 30 of those, over 75% of the U.S. supply comes from imports.

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Host 1  01:37

That's a lot! 

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Host 2  01:38

Yeah, so even when a country seems super resource rich, it's still vulnerable to disruptions in that global trade network. This makes understanding these shifts in trade even more crucial. McKinsey breaks down the complexities using what they call the four dimensions of trade geometry. These dimensions are trade intensity, geographic distance, geopolitical distance and import concentration.

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Host 1  02:00

Okay, I'm already intrigued by this trade geometry concept, but can we break those dimensions down a bit more? What do they actually mean?

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Host 2  02:06

Of course, let's start with trade intensity. It's basically a measure of how much a country relies on trade relative to its overall economy. Some countries live and breathe trade, while others are less dependent on it.

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Host 1  02:18

So it's not just about where a country is trading, but how much of their economy hinges on that trade? 

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Host 2  02:23

That's a great way to put it. Then, you have geographic and geopolitical distance. Geographic distance is pretty intuitive, how far apart are the trading partners, but geopolitical distance is more nuanced. It measures how aligned countries are politically and ideologically, which can have a huge impact on their trade relations. 

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Host 1  02:41

So if two countries see eye to eye on the world stage, they're more likely to trade with each other. It's like a friendship influencing business deals, but on a global scale.

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Host 2  02:49

And finally, there's import concentration. This refers to how many different countries a nation relies on for its imports. A high concentration means they're dependent on a limited number of suppliers. If something goes wrong with one of those relationships, it can be a real problem.

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Host 1  03:04

So high import concentration equals higher risk. It makes sense to spread the risk, just like in investing. I think we've got to grasp on the big picture now. But the report highlights this interesting paradox. While everyone's talking about nearshoring, the average distance goods travel has actually been increasing in recent years, about 10 kilometers per year, to be precise. 

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Host 2  03:24

While some companies are definitely moving production closer to home, it's not happening on a massive global scale, at least not yet. The bigger trend, at least according to the data, is towards more complex and far-reaching supply chains.

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Host 1  03:36

So nearshoring is more of a selective strategy than a widespread phenomenon. But how does this play outdifferently for different countries? Are some embracing diversification more than others?

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Host 2  03:46

That's where it gets really interesting. Larger economies like the U.S., China and Germany, are actually showing more import diversification, meaning they're not putting all their eggs in one basket. They're sourcing goods from a wider range of countries.

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Host 1  03:58

Makes sense.

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Host 2  03:58

But other economies, like those in ASEAN, Brazil and India are actually experiencing increased concentration, also due to their deepening trade relationships with China. 

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Host 1  04:09

Speaking of China, let's zoom in on the U.S.-China relationship, because there's been a major shake up there. Mexico overtook China as the top U.S. goods supplier in 2023. This shift in the balance of power seems significant. 

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Host 2  04:20

It's definitely a seismic shift. The U.S. has been strategically reducing its reliance on China, and that's led to a diversification of its sourcing. Mexico and ASEAN are emerging as key alternatives. The data tells the story: Between 2017 and 2024, the U.S. reduced its share of manufactured-goods trade with China by a whole six percentage points.

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Host 1  04:41

Wow, that's a big chunk of trade rerouted. So Mexico is clearly benefiting, but it sounds like ASEAN is gaining even more ground. Is that right? 

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Host 2  04:48

You're absolutely right. ASEAN's gains are actually larger than Mexico's, hinting at a more significant reorientation towards Asia as a whole. However, it's important to note that a lot of Mexico's growth is in sectors where China wasn't a dominant player to begin with, like transportation equipment and food and beverages.

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Host 1  05:05

So they're not directly competing in all the same areas. But wait, there's another layer to this, right? This value added concept. It sounds a bit complicated.

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Host 2  05:11

It is a bit nuanced, but let me break it down. While the U.S. is importing less directly from China, a lot of the value contained in the goods coming from places like ASEAN actually originates in China.

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Host 1  05:22

Okay. 

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Host 2  05:23

Think about it like building a smartphone. Many of the components might be manufactured in China, then shift to ASEAN for assembly and finally imported to the U.S. So even though the final product isn't coming directly from China, it still has a big Chinese footprint in terms of where the value is actually created. 

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Host 1  05:39

Okay, that's a really helpful way to explain it. It's like a global assembly line. So even though trade data might show a shift away from China, the reality is more complicated.

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Host 2  05:47

And this complexity is why it's so important to look beyond the surface level trends. Speaking of China, they've been busy shifting their focus as well. Developing economies now account for the majority of their imports and exports.

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Host 1  05:59

So who are their top trading partners these days?

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Host 2  06:01

ASEAN has actually taken the top spot, overtaking the Europe 30. This is driven by sectors like electronics, machinery and textiles, where China is becoming the upstream supplier. Latin America is another key growth area for China, particularly Brazil, which exports agricultural goods and metals to China, while importing a lot of manufactured goods in return.

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Host 1  06:24

So China is forging new paths, becoming more intertwined with these developing economies. It's interesting to see them diversifying their partnerships. 

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Host 2  06:31

One trend that raises some eyebrows is their growing dependence on China for imports, particularly in electronics and machinery. We're talking about things like microprocessors and even the equipment used to manufacture semiconductors.

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Host 1  06:44

Right. 

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Host 2  06:45

Relying so heavily on one supplier for such crucial components could be risky in the long run. What if that relationship sours, or there are disruptions in supply chain?

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Host 1  06:55

That's a good point. Diversification is generally a good thing. Over-reliance on any single partner, even a friendly one can create vulnerability. It's a delicate balancing act. 

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Host 2  07:03

It is. Well, we've seen how countries are diversifying their trade partners, how supply chains are being rerouted, and how new trade relationships are emerging. It's a dynamic and constantly evolving landscape, and that means staying informed about global events, analyzing their potential impact on yourbusiness and developing flexible and adaptable strategies. It's about being prepared for the unexpected. Stay tuned. We'll be here to guide you through it.

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Business strategies and tactics to protect against trade uncertainty

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Host 1  07:40

Welcome back. We've been uncovering some seriously interesting trends. It's clear that even the biggest players have to adapt to survive, let alone thrive in this new environment. You know, one of the most surprising things we discussed was the fact that despite all the talk about nearshoring, the actual distances goods travel have been increasing.

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Host 2  07:59

Yeah, it seems counterintuitive. 

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Host 1  08:01

It does, but the data clearly shows this trend towards longer and more complex supply chains. What's the deal with that?

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Host 2  08:07

That's right, while nearshoring definitely makes sense in specific cases, it's not the dominant force shaping global trade at this point. The bigger picture is about managing risk and finding the most efficient and resilient supply chains, which sometimes means going further afield.

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Host 1  08:21

Okay, so it's not just about proximity. It's about finding that sweet spot between cost, efficiency and resilience. 

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Host 2  08:28

Right. 

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Host 1  08:28

Even if it means sourcing from further away. But all of this complexity makes understanding those geopolitical shifts even more critical for businesses. Wouldn't you say?

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Host 2  08:37

Absolutely, those shifts can happen quickly and have ripple effects throughout entire industries.

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Host 1  08:41

What are some practical steps they can take to stay ahead of curve?

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Host 2  08:44

One of the most important things is to diversify their supply chains. We've touched on this before, but it's worth emphasizing. Diversification helps mitigate risk. If you're relying on a single supplier for a critical component and something disrupts that relationship, be it political instability, natural disasters, or even just a simple economic downturn, your entire operation could be jeopardized.

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Host 1  09:05

Spreading your sourcing across multiple regions can act as a buffer against these kinds of unpredictable events, like a safety net for your business.

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Host 2  09:13

Exactly.

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Host 1  09:13

But isn't diversification more than just spreading risk?

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Host 2  09:16

You're absolutely right. Diversification isn't just about playing defense, it's also about playing offense. By sourcing from different regions, you can tap into new markets, access potentially lower costs and even discover new and innovative manufacturing processes or materials.

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Host 1  09:31

So it's a win-win. You reduce your risk and potentially discover new ways to improve your product or service. It sounds like diversification is key for navigating this complex global trade landscape, but with all these moving pieces, how can businesses even keep up with the changes? It seems overwhelming.

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Host 2  09:47

I understand that feeling, but it doesn't have to be overwhelming. There are tools and resources available to help. You can work with consulting firms that specialize in geopolitical risk analysis, and there are many online platforms that track political events and provide insight into their potential impact on business. 

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Host 1  10:03

What else can businesses do to prepare?

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Host 2  10:06

That's where the concept of flexible and adaptable strategies comes in. In this environment, businesses need to be able to shift gears quickly. They need to be able to adjust production schedules, reroute shipments and find alternative suppliers quickly if the need arises. While there are definitely risks to navigate, there are also incredible opportunities for businesses that are willing to adapt and innovate.

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Host 1  10:27

Like what? Give us some examples.

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How nearshoring to Mexico works

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Host 2  10:29

We've already mentioned diversification, but let's take it a step further. Think about exploring new marketsthat might have been overlooked before, or tapping into new sources of talent with specialized skills, or even developing new products and services. Let's revisit the U.S.-Mexico relationship for a second. Remember how Mexico took over the top spot as the U.S. goods supplier in 2023?

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Host 1  10:49

Oh yeah, that was a big one.

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Host 2  10:50

Yeah. It was a big shift, and it wasn't just some random thing that happened. This was driven by some pretty deliberate U.S. policies aimed at reducing their reliance on China, and it's creating some interesting opportunities for businesses on both sides of the border.

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Host 1  11:03

So, if you're a U.S. company that's been really reliant on sourcing from China, maybe it's time to start thinking seriously about nearshoring to Mexico.

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Host 2  11:10

It makes sense.

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Host 1  11:11

It could make your supply chain shorter, reduce those geopolitical risks we keep talking about, and maybe even make you more competitive in the long run.

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Host 2  11:18

And there are some other potential benefits as well. Transportation costs are likely to be lower, and the USMCA trade agreement offers some tariff advantages, too. For Mexican businesses, it's a chance to reallyexpand their reach into that massive U.S. market. It's a win-win situation, but it also highlights the need fo careful planning and strategic decision-making.

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Host 1  11:37

I see what you mean. It's not just about packing up and moving your whole operation. You have to assess the infrastructure, figure out the labor market, and look at the overall business environment in Mexico. It's a big move, but the rewards could be huge.

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Host 2  11:49

The key takeaway is this: Businesses that want to not just survive but succeed in this new environment need to diversify their supply chains, stay informed about geopolitical developments, create flexible strategies, and most importantly, see these changes as opportunities for growth, not just as obstacles to overcome.

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Host 1  12:05

That's a great way to sum it up. Well, I hope you, our listener, are leaving this deep dive feeling a little more informed, a little more empowered and ready to tackle the challenges and opportunities that are outthere.

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Host 2  12:16

Remember, stay curious, stay informed, and never stop learning. Those who are willing to adapt will be theones shaping the future.

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Host 1  12:24

That's so true. Until next time, everyone!

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