Source: Supply Chain Brain
Date: 24th February 2025

Don’t expect U.S. President’s latest round of tariffs, either imposed or threatened, to trigger a boom in domestic manufacturing in the U.S. — or an end to the growth of “nearshored” production capacity in Mexico.

That’s the opinion of the managing director for Latin America with QIMA, a provider of software and services to enable supply chain compliance in the consumer products, food and life sciences industries.

Among the stated goals of the tariffs is to force American manufacturers to return production to the U.S. But this envisioned stampede of “reshoring” faces multiple hurdles and practicalities, QIMA says.

One is the continuing shift in production from China and other parts of East Asia to Mexico. QIMA says there’s been a “huge increase” in such nearshoring projects over the past two years by major retailers, brands and manufacturers.

“There’s been a big change,” QIMA says, citing Ciudad Juárez in the state of Chihuahua as a particular target for producers seeking an ideal mix of low labor costs, supporting infrastructure and proximity to U.S. markets.

Mexico already had a decades-old manufacturing network in place, enjoying low-cost production and favorable duty and tariff treatment for a wide range of goods, in the form of its maquiladora system, much of it located close to the U.S. border. Those facilities have experienced a surge of fresh interest with the rise of Chinese factory wages, the intensifying U.S.-China trade war, and the desire by manufacturers to cut logistics costs.

QIMA says the recent nearshoring boom has little to do with tariffs. It was the COVID-19 pandemic that awakened companies to the risk of long supply lines and reliance on a single source of manufactured goods. “We were not ready for supply chain resilience,” QIMA says, but that mindset shifted quickly when ocean container rates soared and factory lockdowns choked off supply. COVID, QIMA adds, was “an eye-opener.”

The investment in infrastructure in Mexico is too big to scrap now, QIMA says. On the contrary, money and resources continue to flow into the country. Meanwhile, the U.S. isn’t poised to absorb a big increase in manufacturing activity across a broad range of industries. “It cannot go from A to Z,” QIMA says.

U.S. President’s practice of announcing punitive tariffs, only to postpone or revise them at the last minute, creates a great deal of uncertainty among importers about their ultimate amount and application. QIMA speculates that the tariffs on imports from Mexico will likely end up targeting specific sectors, instead of being applied across the board.

Then there’s the question of the United States-Mexico-Canada Agreement, which is up for renegotiation in 2026. QIMA says the new tariffs could end up being a bargaining tactic that’s meant to strengthen the U.S. position going into those talks.

QIMA further believes that comprehensive tariffs on imports from Mexico will encounter heavy pushback by Fortune 500 companies with a major manufacturing presence in that country. “The question will be, is U.S. President willing to go against American interests? Is he willing to threaten General Motors, with its four manufacturing facilities in Mexico?”

Even with the imposition of tariffs, the flow of manufacturing into Mexico will continue, QIMA predicts, noting that QIMA is currently engaging with more than two dozen Asian companies looking to site production there.

In the coming years, certain high-value products such as microprocessors will indeed reshore some manufacturing capacity to the U.S., QIMA says. For the most part, though, QIMA sees the country as continuing its transformation from a manufacturing economy to one that’s more dependent on services.

As companies reconsider their sourcing strategies in light of geopolitical strife and rising costs, “I’m fully convinced that it’s not just based on tariffs,” QIMA says, “but also on creating resilience in supply chains.”