Politics and convenience drive Mexico to be US’s top trading partner

The boom around ‘nearshoring’ and tensions with China have led to a manufacturing boom in Mexico, for the US.

Before Elon Musk announced that he would pour billions into building his largest Tesla plant in the industrial outpost of Monterrey, Mexico, United States trade winds were already shifting south.

In late 2022, Mexico’s Economy Minister Raquel Buenrostro Sánchez said that 400 companies had expressed interest in relocating from Asia to Mexico. New industrial parks were popping up, many driven by Asian money, and the investments were raining down. By June 2023, some $13bn in investments had been secured, according to Mexico’s secretary of finance and public credit, most for auto or auto parts manufacturers.

New numbers from the US Census last week indicate that Mexico is the US’s top trading partner. In 2023, the US traded $798bn with Mexico as the goods it bought from its southern neighbour surged past China and Canada. The boom around nearshoring – a catchy term that describes the movement of companies closer to their preferred market, in this case, the US – has helped drive Mexico into this position.

“This is not cyclical, this is new,” said Andrew Hupert, a trade expert who has lived in China, and now lives in Mexico.

“What I’m seeing is a diversification of manufacturing. The calls started coming from companies saying, ‘I don’t want all my eggs in one basket’,” said Joshua Rubin, the vice president of business development with the Javid Group, a Nogales, Arizona-based company which helps companies start operations in Mexico.