After many months of talk about an uncertain future, Mexico remains the number-one trading partner to the U.S. Lessons learned from supply-chain disruptions and a preferential position under the United States-Mexico-Canada Agreement (USMCA) have increased Mexican foreign direct investment (FDI) more than $1.44 billion since 2019. Exports to its northern neighbor in March were up 15.5% year-over-year.
As the nearshoring movement pushes on at full steam, both manufacturers already in Mexico and those currently considering a reshoring effort will want to keep a close eye on the nation’s prospects going forward. What follows are the five most critical factors currently shaping the future of Mexican nearshoring.
1. Industry Diversification
Mexico has been expanding beyond the manufacture of automobiles, textiles, and agricultural equipment for several years, and the trend is only accelerating. Aerospace and medical device manufacturing have already become well-established industries, while a mass exodus from the geographically and geopolitically risk-averse East Asia brings complex electronics factories closer to the U.S. market. Each new sector will bring vertical business as it grows, solidifying concentrated supply lines and inviting further foreign investment.
2. Labor Market Appeal
The U.S. manufacturing sector is projected to lack 2.1 million workers by 2030. Together with perpetually rising labor costs, this makes a long-term manufacturing effort within the U.S. immensely challenging for many businesses, to say the least. Mexico’s skilled workforce and affordable wages—a fraction of U.S. costs and 30% cheaper than China—are therefore sure to capture some investment from the many manufacturers currently in the process of nearshoring to North America.
3. Upskilling of the Workforce
As Mexico’s industrial base moves beyond traditional textiles and agriculture, the workforce is being upskilled to match the rising complexity. High-tech sectors, like aerospace and complex electronics, require more educated workers and, as a result, businesses are increasingly eager to fund in-house training or coordinate with academic institutions. State-led initiatives, such as Mexico’s extensive STEM programs, are also helping to prepare a more capable and productive workforce.
4. Technological Advances
Mexico’s manufacturers have been quick to adopt Industry 4.0 technologies, such as artificial intelligence (AI), automation, and the Internet of Things (IoT). This has opened the door to a whole new sector—the country’s automation and industrial controls market is projected to grow from $5.5 billion in 2024 to nearly $8 billion by 2029, while setting a standard that is competitive even on a global stage. The automotive industry currently leads adoption, with 34% considered “advanced” by international standards.
5. Risk
No discussion of Mexico’s place in the future of nearshoring would be complete without mentioning risk management. The unanimous sentiment that multicontinental supply lines are a serious liability is what initiated the nearshoring revolution in the first place, and the conditions that fostered that sentiment have only intensified. Managing the uncertainty of U.S. trade relations has recently become a point of special concern for manufacturers in China and around the world. Many of these manufacturers will look at Mexico’s preferential status under the USMCA agreement as an effective way to reduce the risk of sudden tariff hikes or trade restrictions.
Bottom Line
Jorge Gonzalez Henrichsen is co-CEO of The Nearshore Company.