Mexico Gains Ground in U.S. Trade, but the U.S. Deficit Gets Reshuffled Without Disappearing
Washington’s tariffs have shifted suppliers more than they’ve reduced imports, and Mexico is emerging as one of the main winners of that reshuffling.
The U.S. goods trade deficit ended 2025 at a new high—around $1.23 trillion—despite the wave of tariffs pushed by President Donald Trump. Rather than being corrected, the imbalance changed in composition: it narrowed with some partners—particularly China and Canada—but widened with others, including Mexico, which cemented its position as one of the biggest contributors to the U.S. negative balance.
According to figures from the U.S. government itself, the U.S. deficit with Mexico grew meaningfully between 2024 and 2025, in contrast to the decline seen with China. For Mexico, the signal cuts both ways: on one hand, it confirms that parts of supply chains are still migrating toward North America; on the other, it puts the bilateral relationship under a more intense political spotlight—especially as Washington looks to support new tariff tools after legal setbacks to its previous strategy.
For the Mexican economy, this is happening at a time when the external sector continues to be a pillar of growth. Mexico remains highly dependent on the U.S. industrial cycle: when consumption and manufacturing output in its main trading partner accelerate, Mexico’s export engine typically accelerates as well; when they cool, the slowdown is quickly transmitted to states and industrial corridors tied to auto parts, electronics, electrical equipment, and intermediate manufactured goods.
Still, the rise in the U.S. deficit with Mexico does not, by itself, amount to a Mexican macroeconomic “problem.” It largely reflects the productive integration created under the USMCA: Mexico exports finished goods while also incorporating imported inputs, including U.S. components. Even so, the figure feeds political narratives in the United States and can translate into pressure to tighten rules of origin, increase customs inspections, or impose sector-specific measures.
Nearshoring: a real opportunity, but with bottlenecks
The reshuffling of the deficit suggests that, faced with tariff costs and geopolitical risks, many companies have preferred to switch suppliers rather than reduce their overall reliance on imports. In that process, Mexico has gained share thanks to proximity, border infrastructure, manufacturing experience, and the USMCA framework. This aligns with the “nearshoring” trend, which has driven investment announcements and industrial expansion in regions such as the Bajío, northern Mexico, and the border corridor.
However, Mexico’s ability to capture more production faces practical limits. Challenges persist in energy (costs, availability, and regulatory certainty), water in industrial hubs under hydric stress, logistics at congested border crossings, and security along transportation corridors. In addition, the supply of skilled labor and the pace of technology adoption will determine how quickly higher value-added projects can scale beyond basic assembly.
On the financial side, nearshoring’s appeal also hinges on domestic conditions: macro stability, fiscal discipline, and a predictable investment environment. Mexico has maintained a relatively prudent public-finance framework compared with emerging-market peers, but spending trends, public investment needs, and the debt’s financing cost are variables markets will continue to watch—especially in years of moderate growth.
For the export sector, another key factor is the exchange rate. A strong peso reduces local-currency revenues for exporters but makes imports of machinery and inputs cheaper. In a global environment where rates remain high and volatility is driven by Federal Reserve decisions, the USD/MXN rate may continue to shape industrial margins and currency-hedging decisions.
The shift in U.S. trade policy also adds uncertainty. Although Mexico and Canada are often exempt when goods comply with USMCA requirements, the discussion in Washington about “large and persistent deficits” could translate into more targeted actions: antidumping investigations, national-security measures, or pressure on specific sectors. In the past, these tools have focused on steel, aluminum, autos, and more recently on technologies and strategic goods.
At the same time, the 2025 evidence itself points to the fact that protectionism has not significantly reduced the volume of U.S. imports; instead, it has redrawn the supplier map. For Mexico, that means the window of opportunity exists, but it is not automatic: competing for new plants and deeper local supply-chain integration requires resolving domestic bottlenecks and increasing domestic content to sustain benefits in jobs, wages, and tax revenue.
In perspective, the fact that the U.S. trade deficit remains elevated suggests U.S. domestic demand is still absorbing foreign goods, and that global supply chains are still finding ways to adapt. For Mexico, the challenge will be to take advantage of the reshuffling without getting trapped in a “deficit culprit” narrative—by strengthening productive investment, infrastructure, and policy certainty to sustain export momentum.
In short, 2025 made it clear that tariffs have shifted trade more than they have reduced it: Mexico benefits from the supplier switch, but it is also more exposed to U.S. trade policy and to the need to address unresolved domestic issues in order to lock in nearshoring.
