In recent years, Mexico has significantly benefited from multinational corporations’ investment in nearshoring strategies, with substantial investment in manufacturing and logistics infrastructure to move production closer to the United States to reduce supply chain and manufacturing costs. In the last two years, manufacturing production grew by over 5% annually, twice as much as in the prior decade. Nearshoring infrastructure investment is bringing substantial efficiency gains to sectors like automotive, electronics, appliances, and agriculture.

Mexico’s proximity to the United States is a unique strategic advantage to reduce transportation costs and time, making it an attractive location for nearshoring. In addition, the United States-Mexico-Canada Agreement (USMCA) has been a significant factor in attracting nearshoring investments to Mexico, providing favorable trade conditions, lowering tariffs, and smoothing cross-border operations. Mexico’s large pool of bilingual skilled labor also facilitates better communication and more effective resolution of cross-border issues.

A key priority for the recently inaugurated administration of President Sheinbaum will be to adapt to the new trade, immigration and economic policies of the Trump administration, which could affect trade dynamics and investment flows. Also, Mexico’s dependence on Chinese trade and investment has grown significantly in recent years, which will become a factor in the future trade negotiations between Mexico and the United States. For example, the upcoming 2026 review of the USMCA could bring stricter enforcement of trade provisions.

The uncertainty about potential stricter trade terms could potentially slow down investment in some of Mexico’s key sectors, as large global manufacturers might increasingly assess the benefits of re-shoring up manufacturing in the United States 

But a second Trump administration poses far more serious challenges for Mexico, the biggest trading partner of the US. Business leaders and experts on the bilateral relationship fear the fledgling Sheinbaum government is not well placed to navigate them.

https://www.ft.com/content/637b9511-6f16-460b-bc09-32e07c064f5a