Mexico Capitalizes on the Trade Realignment with the United States and Gains Ground in Manufacturing
China’s pullback from the U.S. market opens a window for Mexico, but installed capacity and infrastructure will set the pace of progress.
The reshaping of global trade—accelerated by U.S. tariff policy and companies’ efforts to reduce risk in their supply chains—is benefiting Mexico across a growing number of manufacturing industries. An analysis by the Mexican Institute for Competitiveness (IMCO) shows that between 2018 and 2025, Mexico gained share in 22 of 32 manufacturing sectors, while China lost ground in 29—evidence that “nearshoring” and regional integration are moving beyond rhetoric and showing up in the data.
The backdrop is China’s weakening footprint in U.S. imports since the start of the trade war in 2018 and the subsequent tightening of restrictive measures. Between 2018 and 2024, U.S. imports from China fell 18.5%, even as total imports by the U.S. economy rose 22.4%. Over that period, China’s share of U.S. imports dropped from 21.2% to 13.4%, while Mexico’s rose from 13.6% to 15.5%, supported by proximity, shorter logistics times, and the USMCA framework.
The shift isn’t limited to traditional sectors. Evidence suggests Mexico is also capturing opportunities in more complex segments—particularly computers and electronic equipment, industrial machinery, and advanced manufacturing. This is happening alongside strengthening in areas where the country was already a major player, such as transportation equipment, a cornerstone of North America’s automotive integration.
According to IMCO, Mexico’s biggest gains are in beverages and tobacco, transportation equipment, miscellaneous manufactures, computers and electronic equipment, furniture, industrial machinery, plastics and rubber, nonmetallic mineral products, and metal products. In computers and electronic products, Mexico’s share of U.S. imports increased by 4.5 percentage points between 2018 and 2025, while export value nearly doubled from $59.3 billion to $129.9 billion. In transportation equipment, share rose 6.4 percentage points and export value climbed from $110 billion to $147 billion, reflecting regional demand and the importance of auto parts in intraregional trade.
By contrast, China lost position in categories that for years dominated its export basket to the United States. The largest decline is precisely in computers and electronics, down 34.8 percentage points between 2018 and 2025. China also lost ground in furniture, hides and leather, apparel, household appliances, textiles, plastics and rubber, and nonmetallic mineral products. For IMCO, the takeaway is structural: this is not a temporary dip, but a supplier reorganization that prioritizes resilience, regulatory compliance, and proximity to the end market.
Capacity, Energy, and Logistics: the Bottlenecks of the “Mexico Moment”
The same momentum that creates opportunities also exposes operating constraints. IMCO warns that in industries such as computers and electronics, plants are running close to their limit, with utilization at 97.4% for computing equipment and 94.9% for semiconductors. Nationwide, the challenge is scaling up without growth getting stuck due to power constraints, water availability in certain industrial regions, congestion at border crossings, and limited rail and port capacity. In practice, nearshoring competitiveness is determined as much on the factory floor as it is by dispatch times, reliability of electricity supply, and logistics costs. Investment in transmission networks, generation and storage, as well as in customs facilities, highways, and rail, will be critical to turning the trade realignment into a sustained cycle of industrial expansion.
Another key factor is human capital. The move toward more sophisticated manufacturing requires technicians and engineers, certifications, and local suppliers capable of meeting specifications. In several industrial corridors, shortages of specialized workers are already pushing up wages and turnover. Mexico’s challenge is not only to attract investment announcements, but to translate them into deeper supply chains with higher domestic content and rising productivity—avoiding a scenario where the country is limited to low value-added assembly.
In the short term, the macroeconomic environment also matters. Still-elevated interest rates make expansion financing more expensive for some companies, although financial stability and expectations of better-controlled inflation help support planning. In addition, labor-market dynamics—with sustained minimum-wage increases and more active wage bargaining—can boost domestic consumption, but also require companies to offset costs through automation, training, and efficiency gains.
Looking ahead, the opportunity will depend on Mexico maintaining investment certainty, strengthening infrastructure, and leveraging the USMCA as an integration platform. Relocation is not automatic: it competes with other destinations seeking to capture a share of shifting trade flows, so speed in clearing permits, expanding energy capacity, and professionalizing logistics will be a differentiator.
In sum, China’s pullback from the U.S. market is creating room for Mexico across a broad range of industries, including those with higher technological content. However, locking in these gains will require addressing bottlenecks and raising value added so that increased market share translates into sustained investment, productivity, and stronger growth.
