Mexico's Economy
Nearshoring: Mexico's Opportunity
How US companies moved supply chains from China to Mexico after 2018, the boom in northern industrial parks, and constraints like water, power and security.
Nearshoring means moving production closer to the home market.
Why Mexico
- Proximity to the US: trucks can deliver in days.
- USMCA trade agreement.
- US-China tensions after 2018.
- Pandemic supply chain disruptions.
Boom
- Industrial parks in Monterrey, Saltillo and other northern cities filled up.
- Companies from the US, China and elsewhere announced factories.
- Tesla announced a plant near Monterrey in 2023, though it was later put on hold.
Chinese firms
Some Chinese companies set up in Mexico to access the US market, raising US concerns about rules of origin.
Constraints
- Water shortages in the north.
- Electricity supply limits.
- Security and cartel violence.
- Policy uncertainty around energy and judiciary reforms.
- US tariffs in 2025 created new uncertainty.
Comparison with India
India also seeks China+1 investment, but Mexico’s advantage is proximity to the US.
The moved plant
A US appliance maker shifts production from China to Monterrey, cutting shipping time to US stores from weeks to days.
Thinking nearshoring has no limits
Water, power, security and policy constrain it.
Key takeaways
- Nearshoring moved factories from China to Mexico.
- Proximity and USMCA give Mexico an advantage.
- Northern industrial parks boomed.
- Water, power, security and tariffs are constraints.
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