Nearshoring is bringing manufacturing jobs back to North America – and experts can’t agree on who is winning more from this new trend, the US or Mexico. It seems, however, that both countries are winners with the Mexico and US reshoring trend.
In the 90s, there was a huge shift in the global marketplace. China and other Asian nations became the focus for companies looking to offshore – or relocate internationally – their manufacturing operations to reduce overhead. However, over the past decade, and especially the past few years, a new trend has emerged. Increasingly, Mexico and US reshoring trend is benefiting the two NAFTA partners.
As China’s cost of labor steadily rises and its currency increases in value, many companies are bringing their business back home – a process known as nearshoring. Mexico has emerged as a clear favorite for nearshoring, but some hold the belief that this hurts the US. Others point out that at least as many companies are nearshoring to the US. In fact, depending on which study you read, some claim the US is the winner of the most nearshoring moves, while others claim https://www.tecma.com/nearshoring-mexico-decreases-costs/Mexico receives the most nearshoring relocations. Could it be that both are making economic gains as a result of the Mexico and US reshoring trend?
A Symbiotic Partnership
In 2015, the US was clearly the nearshoring location of choice. But in 2012, Mexico was clearly the leader. Rather than view this back-and-forth in the Mexico and US reshoring trend as a reflection of a neck-and-neck race or a competition, others have demonstrated that Mexico and the US have different strengths that complement one another in a kind of regional partnership to compete with other regions on a global scale.
While there are some overlaps, many of the assets of Mexican labor are not shared by US labor, and vice versa. For example, the US has a severe shortage of skilled welders, machinists, and toolmakers, whereas Mexico can easily supply such trades. But more to the point, it is observably true that engineering jobs are more likely to be reshored to the US while skilled manufacturing jobs are more likely to be reshored to Mexico. In this way, the two manufacturing nations complement one another.
Additionally, the two economies are so intricately linked, that many of the inputs for finished goods made in Mexico are produced in the US. Forty percent of every Mexican-made good exported to the US is US-made content. This means US workers get $1 out of every $4 spent on goods that are manufactured in Mexico. Goods often cross the border several times before completion. Likewise, Mexico and the US partner on foreign direct investment, joint ventures, new sales and distribution offices, and shared R&D facilities. As reshoring brings business back to North America, a strong partnership is in place between Mexico and the US to ensure mutual success in the global marketplace.