The new cold war between the US and China is the biggest threat to the global economy. Yet the geopolitical tensions will also create some winners. Take Mexico, for example. This year it overtook China to become the largest exporter to the US, while growth in manufacturing has helped Mexico’s GDP exceed expectations recently. And with “nearshoring” – where companies that supply the US market move factories closer to the final consumer – set to increase, the Mexican economy’s fiesta is only just beginning.
Nearshoring is not a new phenomenon. In 2013 an influential report from the Boston Consulting Group noted that hidden costs of offshoring – less flexibility to react to changing demand, complicated logistics, growing labour costs and theft of intellectual property – were encouraging companies to replace Asian factories with ones closer to the US. But since then, the supply-chain disruption caused by Covid, Russia’s invasion of Ukraine, and intensifying trade restrictions between the US and China have accelerated the trend.
According to a 2022 report published by the Inter-American Development Bank (IDB), nearshoring could increase Latin America’s annual goods exports by $64bn and services exports by $14bn
