This Article is written by Ernesto Mendoza
Nearshoring—the re-localization of value chains closer to end markets—has gained significant traction among global manufacturers seeking greater resilience and cost efficiency. For North American companies, Mexico offers an attractive alternative to long, complex supply chains in Asia. The country’s geographic proximity to the United States, favorable trade agreements (including USMCA), and competitive labor costs bolster its status as a nearshoring hotspot.
As we enter 2024–2025, these benefits are converging with post-pandemic supply chain reevaluations. Companies now prioritize shortened lead times, reduced transportation costs, and the ability to adapt quickly to shifting market demands—factors that naturally position Mexico as a front-runner. Yet, while these shifts unfold, the Mexican government has also sought to protect strategic domestic sectors—particularly textiles—through new tariff measures designed to curb unfair competition.
The December 19, 2024 Decree: Protecting the Textile Industry
On December 19, 2024, President Claudia Sheinbaum and Minister of Economy Marcelo Ebrard announced a significant import duty hike specifically targeting the textile industry. This decree aims to address widespread abuses of the IMMEX program (Industria Manufacturera, Maquiladora y de Servicios de Exportación) and support national producers. The key elements of the decree include:
- A 15% import duty on goods classified under 17 specific Mexican Harmonized Tariff Schedule (MXHTS) codes from Chapters 52, 55, 58, and 60 of the Mexican Harmonized Tariff Schedule (LIGIE).
- A 35% import duty on 138 goods classified under various MXHTS codes from Chapters 61, 62, 63, and 94 of the LIGIE.
- Expansion of the restricted goods list under the IMMEX program for textile imports, effectively limiting certain companies from exploiting temporary import loopholes.
The decree serves several purposes. It strengthens compliance with IMMEX by ensuring companies must re-export at least 80% of temporarily imported goods. Government data shows that 48% of those goods never left Mexico. By preventing the illegal sale of ‘temporary imports,’ the decree aims to combat unfair practices and protect over 400,000 textile-related jobs. Supporting the local industry is another goal, as the government estimates that abuses of the IMMEX framework contributed to 79,000 job losses in 2024 and a 4.8% annual GDP reduction (equivalent to 1,229 million Mexican pesos). The decree also prioritizes trade with FTA partners, ensuring that companies operating within free trade agreements remain exempt and continue to have incentives for complying with Mexico’s trade regulations. This measure builds upon a previous decree from April 22, 2024, which also increased import duties on certain goods to stem unfair competition.
Interplay Between Nearshoring and Textile Tariffs
The convergence of nearshoring trends and the textile decree makes 2024–2025 particularly significant for several reasons. Businesses continue recalibrating their supply chains in the wake of COVID-19, making this a pivotal window for adopting nearshoring strategies. The U.S. political cycle can directly influence tariff structures and demand for nearshored goods, prompting companies to closely monitor these trends and align their relocation decisions with evolving policy landscapes. Additionally, shorter transportation routes and lower carbon emissions are increasingly critical, and Mexico’s proximity to the U.S. supports corporate environmental, social, and governance (ESG) goals.
While the decree raises duties on certain textile imports, it is targeted rather than all-encompassing. Mexico still actively promotes nearshoring in numerous sectors—automotive, aerospace, semiconductors, and mining—where labor and cost advantages remain compelling. The new tariff policy mostly addresses textile-specific abuses, ensuring legitimate importers and exporters face minimal friction.
Mexico’s Ongoing Competitiveness vs. China
Despite concerns that higher import tariffs in textiles could discourage foreign investment, Mexico continues to offer compelling advantages that keep it competitive with China. Geographic proximity reduces lead times significantly, a key factor for U.S. manufacturers seeking just-in-time production. Overland routes from Mexico to the U.S. are often cheaper and more predictable than ocean freight from Asia. Mexico benefits from duty-free access to the world’s largest consumer market under USMCA, which is an advantage China cannot match. Additionally, Mexico has over 50 free trade agreements, broadening export possibilities and mitigating tariffs beyond North America. While China’s wages have risen for over a decade, Mexico’s competitive wages and skilled manufacturing base—developed through decades of maquiladora operations—remain attractive. This workforce is experienced in electronics, automotive, and aerospace sectors, making it ripe for nearshoring growth.
As more companies nearshore, supporting industries—from logistics to component manufacturers—expand, creating a virtuous cycle of reduced costs and enhanced innovation. Public and private sectors continue improving infrastructure, particularly in industrial corridors in the north and Bajío regions. Companies gain flexibility by being closer to design centers and end consumers, allowing for faster iteration and reduced time-to-market. Diversifying away from China helps avoid potential geopolitical risks and currency volatility.
Persistent Obstacles and Mitigations
Mexico still confronts structural challenges that can slow nearshoring’s potential. Ongoing debates about energy ownership and pricing can deter large-scale industrial investments. Many multinational firms target carbon-neutral operations, so access to reliable renewable energy in Mexico is crucial. Investors require stable rules and clear processes; abrupt legal shifts pose a risk to foreign commitments. Some regions present higher security risks. The government is intensifying efforts to combat organized crime and protect industrial corridors. Despite improvements, certain ports, roads, and customs facilities still lack the capacity to handle surging trade volumes efficiently.
Economic Outlook: Seizing a Once-in-a-Century Opportunity
Despite industry-specific headwinds—such as the textile sector’s current turbulence—experts remain cautiously optimistic about Mexico’s broader nearshoring trajectory. The country’s combination of strategic location, favorable trade agreements, and proven manufacturing know-how continues to lure companies seeking cost savings and supply chain resilience. Organizations like COPARMEX stress that addressing energy policy, security, and judicial reforms could unlock a “once-in-a-century” economic transformation. If done right, nearshoring can accelerate job creation, securing 400,000 jobs in the textile sector alone and adding thousands more in other verticals. Ensuring that locally produced content is used extensively in manufacturing can boost domestic consumption and strengthen Mexico’s macroeconomic stability. Foreign investment often brings new technologies, enhancing workforce skills and productivity.
Conclusion
By December 19, 2024, the Mexican government’s robust policy actions—highlighted by the new textile import tariffs—underscore its commitment to protecting domestic industries and upholding IMMEX rules. While the move temporarily raises concerns for certain importers, it is largely aimed at curbing unfair practices that erode Mexico’s competitive edge. Meanwhile, nearshoring continues to gain momentum in the broader manufacturing landscape, thanks to Mexico’s geographic advantages, trade benefits, and maturing industrial ecosystem. Balancing the enforcement of stricter import regulations with pro-investment reforms is a delicate but necessary endeavor. Looking ahead to 2025, Mexico stands at a crossroads: it can become a manufacturing powerhouse in the Western Hemisphere—particularly for North American markets—or miss out due to ongoing structural and regulatory challenges. By leveraging nearshoring trends effectively and ensuring a level playing field in industries like textiles, Mexico could seize a historic opportunity to reposition itself as a leading global competitor, fully capable of holding its ground against major players like China.
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