Mexico: China’s biggest threat?

Mexico and the U.S.: strategic partners in the new global economy

If you’ve been reading the headlines, you might think nearshoring is in trouble—thanks to recent elections and the looming threat of higher tariffs. And sure, the path forward may get more complex as the U.S. and Mexican administrations set their direction in early 2025. But I believe Mexico stands to gain more than it loses in the long run—for one simple reason: China’s biggest threat is Mexico. That’s right. Set down your coffee and let me explain.

The largest and most profitable consumer market in the world is the United States. And even if China’s economy has already overtaken—or will soon overtake—that of its northern neighbor in size, nobody consumes quite like the American consumer. Our neighbors to the north swipe their plastic cards online, in stores, and across retail shelves like economic superheroes, fueling the balance sheets of companies and governments alike. Access to these real-life superheroes is coveted by businesses and investors across the globe—especially in China.

Yes, we may see new tariffs or trade adjustments between Mexico and the United States. But getting stuck on that misses the much bigger geopolitical, geoeconomic, and technological shifts already underway between the two major powers of the next few decades. Don’t let your coffee get cold—I need you fully alert for this part.

Mexico’s strategic role in global supply chains

Structurally, both the U.S. and China want—and need—to strengthen their supply chains to ensure access to goods, services, and customers. It may sound appealing for some industries to imagine producing 100% of everything within their own borders. But in practice? That’s a lot harder. And that’s where Mexico comes in—with a guaranteed seat at the table, and a lot of leverage to negotiate better terms with either side. It may not be true that all roads lead to Mexico… but try naming a manufacturing powerhouse with excellent weather that shares a border with the United States, and you’ll find that most roads pass through here.

Strategically, China has more to lose than the U.S. from Mexico’s rise as an economic powerhouse. Most (though not all) of the products currently made in China can be made—and are already being made—in Mexico. Sure, there are technological gaps in capabilities. But if you’ve read my other columns (I know you have) on AI opportunities across Mexico and Latin America, you know those gaps are going to shrink—dramatically—in the coming decades.

Mexico is a logical, secure, geographically close partner that can substitute for a large share of what China now produces and ships to the U.S. And that makes Mexico’s current economic moment the biggest long-term threat to China’s position. This won’t happen overnight—but when the right mix of policy, investment, entrepreneurs, and business leaders align around a shared vision, something remarkable can happen.

How to make the most of this moment

So now that you’re (rightfully) excited about this historic moment—and the role you can play in shaping it—what should you do?

• Keep an eye on the policies, trade agreements, and legislation that could affect your industry directly or indirectly. If something feels short-sighted, reach out to the elected officials in charge.

• Start looking for partners both in the U.S. and within Mexico to build long-term alliances that can thrive in this new environment.

• Identify your own competitive edge as Mexico finds its footing amid the shifting geoeconomic and geopolitical landscape between the U.S. and China.

In the end, this makes Mexico the key player in shaping the future between China and the United States—serving the needs of those economic superheroes to the north, who want to fill their homes, garages, backpacks, and companies with the goods they’ve grown used to. And it also means there’s never been a better moment to start or scale your business in the Mexican market. What matters most is that you set your strategy, place your bets, and manage your geostrategic risk like the globally minded business leader you are.

Originally published in Spanish for Fast Company Mexico:
https://fastcompany.mx/2024/12/13/mexico-estados-unidos-china-nearshoring/