system
Given the following post, respond as if you're commenting on Reddit:
human
Why is China, not Mexico seen as the US's factory?

Despite being right beside the US and having NAFTA since 20 years ago, Mexico exports around half of what China exports to the US 

Why does the US import so much from across the pacific from a country that they have an intense rivalry with, rather than right across the border? Is it due to Chinese strength or Mexican weakness?
gpt
China is just a much larger economy with a much larger total output. In any country besides Singapore and some EU countries, exports consist of only a fraction of GDP as most of it is domestic consumption and investment. As a percent of GDP, the three most isolated major economies in the world are the US, Japan, and China in that order. In other words, you’re right to say that China would be less inclined towards exports than a country like Mexico, being far from any consumer market larger than its own, because it *is*. However, because China’s GDP is so large, even that smaller percentage accounted for by exports dwarf’s Mexico’s export volume.

There is a hard cap on how much of an economy can be dedicated to exports. On a simple level, exports bringing money in will always fuel domestic saving (generally but not always channeled into domestic investments) and consumption through profits and wages. Additionally, the logistics of shipping goods from an inland factory to the border or to a port are handled by domestic partners. Finally, there is always a level of redundancy in industries whenever a market is not entirely free. In the case of different countries, most have tariffs, and only very few have genuine freedom of labor movement. These barriers allow local firm providing the same good as an international firm to survive in spite of a theoretically less efficient process. Further, cultural sensitivities also create redundancy. A good example of this is Alibaba, which initially provided much the same service as amazon, but in a way that catered more to Chinese consumers.

Redundancy is important because it means a local firm is substituting goods and services that would otherwise be provided to a domestic customer base by a foreign firm. In other words, it’s another reason why it’s impossible for any country with any regulatory and cultural differences with another country to be perfectly integrated into their economic system. 

This gets to the question of why the US doesn’t just source all it’s imports from Mexico. On face, Mexico is a relatively well educated country with statistically some of the hardest working employees in the world, with relatively low labor costs. However, the preferences of Mexican firms also need to be taken into account. Even if the US deliberately shifted its supply chain away from China and towards Mexico with some kind of government stimulus, there is only so much of Mexico’s GDP that can be dedicated to exports because of the many other activities servicing domestic customers and the logistics of exports and imports which need to be considered.

As a final note, transportation costs are only a fraction of the total costs of exports. China-US shipping costs are $823 per container.

The bottom line: bigger economies, as a rule, export more, even to faraway countries. The US, a huge economy, has an immense demand for imported goods that can’t be filled by Mexico alone. Whether the US likes to import to China is irrelevant, the fact is that China *can* produce what American firms and consumers are looking for so they buy.