Nearshoring's Promise: Can Mexico Outsmart the Populist Dragon?
Mexico faces a potential boon from US nearshoring, but Trump's policies create uncertainty. The country needs strategic planning and collaboration to capitalize on the opportunity. While integrated production is key, Trump's populist agenda could hinder progress.
In an increasingly fragmented global economy, the term “nearshoring” has become a defining strategy for nations seeking to fortify their supply chains. Nowhere is this more relevant than in Mexico, where proximity to the United States offers unique opportunities—and challenges—as shifting geopolitical currents reshape North American economic ties.
Lorena Rodríguez León, Director of the Faculty of Economics (FE) at UNAM, underscores that recent U.S. policies prioritizing supply chain resilience have thrust Mexico into a new, complex economic paradigm. These initiatives, aimed at bolstering American industries and reducing dependence on distant suppliers, present Mexico with an opening for internal development. Yet Rodríguez León cautions that seizing this opportunity depends on well-crafted national strategies and private-sector initiatives. Merely gaining access to global markets is insufficient—Mexico must pair these advantages with a coherent vision for growth.
The current geopolitical climate complicates Mexico’s nearshoring prospects. With Donald Trump poised to assume the U.S. presidency once more, his proposed economic measures—including heightened tariffs, fiscal stimulus through tax cuts, and a stricter immigration policy—signal turbulent waters ahead. These initiatives carry implications for inflation, fiscal deficits, and labor markets on both sides of the border.
Trump’s hardline stance on immigration, in particular, threatens to disrupt sectors such as construction, care work, and services, where immigrant labor is vital. At the same time, his push for economic nationalism and job creation within the United States raises questions about Mexico’s role as a regional partner. The outcome will depend largely on whether the United States views Mexico as an ally within an integrated North American economy—a vision enshrined in the renegotiated USMCA (T-MEC) trade agreement.
If such a partnership holds, Mexico could see major initiatives, such as electric vehicle production, reach full maturity. However, if Trump’s policies turn protectionist, Mexico’s economic landscape could become precarious.
The Promise and Peril of Nearshoring
Gary Gereffi, professor emeritus at Duke University and a prominent voice in global value chain analysis, argues that nearshoring must be viewed as part of a broader strategy for integrated regional production. Speaking at the conference North American Value Chains in the Context of Nearshoring: Opportunities and Challenges for Mexico, Gereffi emphasized the need for Mexico to convert its existing production infrastructure into competitive, technology-driven opportunities.
Nearshoring, Gereffi explains, is fundamentally about relocating production closer to end markets—a strategy that benefits Mexico given its geographical advantage. Yet proximity alone is not enough. For Mexico to capitalize on nearshoring, it must align its industrial policies with emerging technologies and foreign investment. Without modernization, existing plants will fail to complement the technological advancements occurring north of the border.
The challenge for Mexico, then, lies in striking a balance between national objectives and regional integration. As Gereffi notes, natural resource nationalism—exemplified by Mexico’s control over lithium reserves—adds another layer of complexity. Policymakers must determine how resources like lithium can factor into regional strategies without compromising national sovereignty.
The stakes for Mexico are high. As Jorge Mario Martínez Piva, an officer at the Economic Commission for Latin America and the Caribbean (ECLAC), points out, medium-sized economies like Mexico operate in a unique geopolitical space. While large economies increasingly adopt nationalistic policies under the banner of security and economic resilience, smaller and medium-sized nations must adapt to these shifts or risk marginalization.
For Mexico, the key to unlocking nearshoring’s potential lies not merely in financial resources but in institutional capacity. Designing effective industrial policies—ones that foster innovation, attract foreign investment, and modernize existing industries—requires robust governance and strategic vision. Nearshoring will not materialize on its own; it demands deliberate efforts to integrate Mexico’s economy with its northern neighbor.
Martínez Piva highlights the importance of state capacity in this endeavor. Governments must coordinate with private-sector actors to identify industries where Mexico can achieve a competitive edge. Whether through electric vehicle production, advanced manufacturing, or technology-driven supply chains, Mexico must look beyond traditional industries to secure its place in the regional economy.
Challenges on the Horizon
The path forward is fraught with challenges. The specter of two new administrations on either side of the U.S.-Mexico border adds uncertainty to an already volatile geopolitical environment. Trump’s second presidency will undoubtedly prioritize domestic job creation, while Mexico’s leadership will face pressure to balance national interests with regional cooperation.
Moreover, international competition remains fierce. Countries like South Korea, Japan, and Taiwan continue to court U.S. industries, offering advanced technological ecosystems that Mexico has yet to fully replicate. While these nations lack Mexico’s geographical proximity, their technological capabilities present a formidable challenge.
In this context, Mexico must carve out niches within emerging regional supply chains. It cannot rely solely on its existing infrastructure; instead, it must attract foreign investment that modernizes production facilities and integrates them into U.S. value chains. Failure to do so risks leaving Mexico behind as other nations capitalize on nearshoring trends.
As hyperglobalization gives way to regional production networks, Mexico finds itself at a strategic crossroads. The nearshoring trend offers Mexico a unique opportunity to strengthen its economic ties with the United States, modernize its industries, and position itself as a key player in North American supply chains.
However, this opportunity is not without risks. Protectionist policies, labor market disruptions, and international competition all pose significant challenges. To navigate this complex landscape, Mexico must embrace a forward-looking strategy that balances national objectives with regional integration.
Lorena Rodríguez León’s vision for Mexico’s nearshoring potential is clear: without coordinated government policies, private-sector innovation, and technological modernization, the promise of nearshoring will remain unfulfilled. But with the right strategies in place, Mexico can seize this moment to drive internal development, strengthen its economy, and emerge as a critical partner in the North American region.
The window of opportunity is open—but it will not remain so forever. For Mexico, the time to act is now.
