The 21st century has been kind to Mexican manufacturing. Mexico’s goods export to the United Statesates has increased 350% from $136 billion in 2000 to $475 billion in 2023, sufficient for a rise to the top position on the list of U.S. trading partners. Growing geopolitical tensions between the United States and China, conflicts in the East, and a global pandemic have all done their part to usher a return to North American manufacturing, and Mexico is the obvious benefactor.
For investors and business owners, however, the future is of much greater interest than the past. Both those who intend to nearshore and those who are already established in Mexico must consider and adapt to the trends that are shaping tomorrow’s manufacturing landscape. What developments are expected to bring the biggest change, and what will those changes look like?
Below is an overview of five trends manufacturers should keep an eye on through 2025.
1. Upskilling of Labor
Mexican manufacturing is becoming more advanced. Until recently, textiles, agriculture, and basic electronics made up the bulk of the nation’s production. Lessons learned from the recent microchip shortage are beginning to change that, as are the geopolitical and logistical concerns surrounding the disproportionate concentration of complex-electronic manufacturing in Southeast Asia. This influx of demand for advanced electronic, automotive, and aerospace manufacturing—with Mexico’s transportation export to the United States already up 23% from pre-pandemic numbers—is now making worker-education a bigger priority than ever before.
The short-term result will be increased intra-company investment—likely involving cooperation with educational institutions—in upskilling labor to equip workers for higher-level tasks and increase value added per capita. The long-term result will be a more educated and capable workforce that bodes well for the future of Mexican manufacturing.
2. Influx of Chinese Companies
The U.S.’s trade war with China, initiated under the Trump administration in 2018, has been among the primary drivers of Mexico’s nearshoring boom. Manufacturers forced to pay significant tariffs on imports to the U.S. from China have looked for alternative locales to restore their profit margins. Ironically, Chinese manufacturers are no exception. Mexico’s FDI from China totaled $5.6 billion in 2023, compared to just $267 million in 2018, as Chinese businesses seek to circumvent tariffs through USMCA free-trade agreements.
These companies are primarily focused on the automotive, medical, and semiconductor industries—centered in northeastern Mexico, Ciudad Juarez and Tijuana, and the regions nearest Texas and Arizona, respectively—and will continue to make a significant impact in those areas while the trade war continues.
3. Supply Chain Diversification
In addition to reduced tariffs, lower wages, and an able workforce, Mexico can offer two almost invaluable benefits: low-cost and low-risk logistics. And while proximity to the U.S. market and ongoing infrastructure investments have long enticed suppliers with the promise of minimal overhead, the COVID-19 pandemic, the Suez Canal incident, war in Gaza and the Ukraine, and the ever-looming threat of a Chinese invasion of Taiwan have now likewise placed risk management at the forefront of supply-chain discussion.
This means that Mexico is likely to see continued investment from all throughout the world, not just China. Manufacturers are expected to hedge their bets by building new factories in developing hubs. Complex supply chains that zigzag across oceans are expected to be simplified by keeping material sourcing, equipment sourcing, manufacture, and distribution at the same end of the globe. And the primary beneficiary is, once again, Mexico.
4. Sustainability Efforts
The U.S.’s drive for products that are made in North America has been accompanied in equal strength by a drive for green manufacturing. Consumers are increasingly likely to factor sustainable production into their purchasing decisions, while regulatory bodies are tightening restrictions and introducing incentives around the sustainability issue. The State of California has recently included scope-three emissions in its climate reporting requirements, and other legislatures are likely to follow.
The Mexican government’s newfound commitment to sustainable energy will therefore provide a competitive advantage to its manufacturers as stateside clients begin to favor suppliers that do not mar their climate reports. Manufacturers will likewise find internal sustainability measures as an increasingly sure means of standing out among their competitors.
5. Automation and Smart Manufacturing
Manufacturing as a whole is experiencing rapid change, and Mexico is expected to be at the forefront. Developments in artificial intelligence (AI) and Internet of Things (IoT) technologies have quickly brought the “fourth industrial revolution” to the world’s doorstep. Mexico’s place on the global manufacturing stage will depend on its ability to adopt these smart manufacturing technologies in a timely and effective manner.
Mexico has already made significant progress in automation—especially in the automotive sector, 34% of which has been deemed “advanced” by the International Trade Administration—and is likely to continue in that trend as new factories are raised by reshoring manufacturers. Heightened automation will reduce the need for manual and menial labor and further increase demand for educated workers capable of managing complex technologies or fulfilling more social roles.
Bottom line
That Mexico will remain atop manufacturing headlines is beyond a doubt. How exactly those headlines will read, however, remains to be seen. New technologies, social trends, and geopolitical developments are all vying to leave their mark on the coming year. By keeping an eye on each one, and by proactively adjusting for the likeliest eventualities, manufacturers can position themselves to make the most out of Mexico’s manufacturing revolution.
