MEXICO Trends and Developments Contributed by: Javier Domínguez, Santiago Carrillo and Gabriel Torres, Ritch Mueller
Mexico 2025: Nearshoring, Tariffs, Uncertainty and Other Hurdles Background
In this context, Mexico has become one of the principal actors in the nearshoring scenario. In 2023, Mexico surpassed China as the United States’ main trading partner, consolidating its position as a key destination for nearshoring. Mexico has positioned itself as one of the main destinations among the countries offering nearshoring opportunities. This is due to the fol - lowing, among other factors: • the border with the United States, one of the largest consumer markets, along with the similarity between the time zones of both countries; • the trade agreements that Mexico and the United States have entered into, such as the United States–Mexico–Canada Agreement (USMCA), which should provide certainty to producers and reduce export costs; • the relatively low human capital costs and the high level of specialisation as a result of already established manufacturing industries, such as the automobile industry and the soft - ware industries; • Mexico has a growing talent pool – it is home to over 560,000 software developers, and this number is set to grow as universities expand their technical curricula; • the similarity between Mexican and US cul - tures, especially along the border; • the proximity in both location and time zones means teams can work simultaneously, speeding up decision-making and minimising delays; and • the competitive production process supply costs. These and other factors have led to greater for - eign direct investment in Mexico, led by com - panies seeking to benefit from nearshoring by establishing their production processes in Mexi -
Prior to the 2024 United States elections and the Trump administration’s inauguration in January 2025, due to its privileged economic and geo - graphic position, Mexico was playing a leading role in nearshoring, a topic that had become increasingly popular in the international busi - ness scene. Nearshoring is a strategy employed by compa - nies to relocate production chains, processes and services to areas geographically close to major consumer markets, thereby reducing costs. Specifically, transportation of manufac - tured goods from the US–Mexico border to any point in the United States takes about 24 hours, which helps to decrease delivery times, risks and expenses. In recent years, offshoring – a strategy that con - trasts with nearshoring – has revealed its limi - tations, prompting companies to seek alterna - tives for cost reduction. For example, US and European companies that establish production chains in Asian countries encounter cultural and linguistic differences, which can increase pro - duction costs, as well as logistical and geopoliti - cal challenges. Altogether, while offshoring initially offered cost savings advantages in terms of labour and sup - ply chain expenses, the drawbacks outlined above have prompted companies to reassess their over-reliance on specific global regions. In this context, nearshoring has become an attrac - tive alternative for companies due to this strat - egy’s relatively low production costs compared to those of the companies’ country of origin, and geographic proximity reduces relocation and logistics costs.
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