Mexico has become a key player in the reconfiguration of global supply chains as companies seek to mitigate risks, diversify sourcing, and reduce exposure to geopolitical tensions, reports the International Monetary Fund (IMF) in a new working paper. The “Relocation of Global Value Chains: The Role of Mexico” report, analyses how global value chains (GVCs) are shifting, especially from China toward other locations.

The IMF highlights that the ongoing reorganization of trade flows has accelerated since 2017 due to the US–China trade dispute, tariff increases, and the disruptions caused by the COVID-19 pandemic and the war in Ukraine. These factors have led firms to relocate production closer to the US market, with Mexico emerging as one of the main beneficiaries.

Sectoral Shifts

The paper identifies automobiles and transport equipment, electronics, and semiconductors as the sectors where Mexico has gained the most ground in the US market. Between 2017 and 2023, Mexican exports to the US increased by about US$163 billion, with vehicles and auto parts representing nearly 30% of the increase, while computers, electronics, and related equipment accounted for roughly 15%. Other manufacturing sectors, such as machinery and plastics, also expanded their role.

The IMF notes that Mexico’s stronger performance in these sectors coincides with US tariffs on Chinese imports, which created opportunities for Mexican producers. The share of US imports from China fell by nearly 8%, while Mexico’s share increased by about 2%, alongside gains for Vietnam and some Asian economies. 

To support export expansion, Mexico increased its imports of intermediate goods, particularly from China and other Asian suppliers, reinforcing its role within global value chains

FDI also rose significantly, with inflows directed mainly to manufacturing sectors tied to tariff-affected goods. Much of this investment originated in the United States, and was concentrated in northern states with existing industrial infrastructure. Mexico’s share of FDI to emerging markets climbed from 6% in the 2010s to nearly 10% by 2023, reports the IMF.

Infrastructure and Policy Needs

Mexico’s ability to sustain these gains depends heavily on addressing structural and institutional challenges, says the IMF. Key among them is public investment in infrastructure, especially in energy, transport, and water systems, to reduce bottlenecks and improve efficiency. The paper underlines that faster execution of infrastructure projects would strengthen Mexico’s attractiveness as a nearshoring hub.

The IMF also highlights the importance of regulatory reforms and greater private sector participation in strategic markets. Expanding access to financial services is another priority that would enable firms, particularly smaller ones, to take advantage of opportunities in global supply chains.

The working paper stresses that Mexico must also invest in human capital. Improving workforce skills and increasing female labor force participation are seen as essential to ensure that the benefits of nearshoring are inclusive and sustainable. Without tackling these gaps, the relocation of global value chains may deepen regional and social disparities.