Companies Re-Evaluate Supply Chains Amid US-China Trade War

Although in a “truce stage,” the US-China trade war continues to reshape global supply chains, driving companies to adopt nearshoring and reshoring strategies. In this environment, companies must evaluate the pros and cons of choosing one of these strategies to continue playing a relevant role in the global economy. 

Considered a major economic conflict of the modern era, the United States-China trade war has evolved since escalating in 2018. During US President Donald Trump’s second term, the dispute has settled into a new stage characterized by high, persistent tariffs. This new stage began on Feb. 1, 2025, when Trump signed an executive order imposing a 25% tariff on Mexico and Canada and a 10% tariff on China, citing immigration and fentanyl concerns as justification.

After back-and-forth negotiations, which featured tariffs as high as 145% for Chinese imports to the United States and 125% for US imports to China, on June 10, 2025,  both countries achieved a truce negotiated in London, UK. According to the agreement, US imports to China will get a 10% tariff, while Chinese goods entering the United States will get a 55% tariff. “Our deal with China is done. Full magnets and any necessary rare earths will be supplied, up front, by China. Likewise, we will provide China what was agreed to, including Chinese students using our colleges and universities (which has always been good with me!). We are getting a total of 55% tariffs, China is getting 10%,” Trump posted on Truth Social. 

Impact on Supply Chains 

While the COVID-19 pandemic first exposed the vulnerabilities of long-distance supply chains, the United States-China trade war cemented the move toward regionalized models. These events have compelled companies to accelerate their transition from global networks to nearshoring and other regional strategies to ensure resilience. "Reshoring has become more common for two main reasons. From an operational standpoint, it offers greater control over the supply chain and reduces risks from global instability. There is also a brand image factor; promoting a national brand by emphasizing domestic production aligns well with a conservative narrative, such as Trump’s,” says David García, Head of the International Relations Department, UNAM FES Aragon, in an interview with MBN. 

Regarding nearshoring, García noted that Mexico's relevance has grown due to several key advantages, including its preferential tariff access under USMCA, its geographical proximity to the US market, and the stable relationship between the two governments. He explained that these factors allow companies to reduce their dependence on Asian supply chains and mitigate risks from global instability, such as pandemics or international conflicts. Nearshoring is also supported by Mexican government initiatives like Plan México, which seeks to leverage USMCA to attract investment. "Despite the uncertainty created by Donald Trump's policies, investment has responded favorably. We estimate that in Mexico, nearshoring grew by around 165% in 1Q25 year-on-year, with approximately 40% of that growth concentrated in manufacturing, and another significant portion in transportation and storage,” he notes.

Experts stress that while nearshoring and reshoring offer clear advantages, careful analysis is crucial because shorter supply chains can become inefficient for complex products, such as electric vehicles (EVs), if essential components are not available in the chosen region. “The more complicated the product is, the higher the need for global sourcing. For a simple product like a plastic Christmas tree, the materials are readily available regionally. However, for EVs, it is different. Cars are famous for having tens of thousands of components sourced from a long list of supplier tiers. The chance of sourcing everything from nearby for a complex product is highly unlikely. No matter how near you bring the final assembly, there will still be a certain level of global sourcing required for components like semiconductors,” says Benjamin Wong, Head of Transport, Logistics, and Industrials, InvestHK, in an interview with MBN. 

This complexity is echoed by Harvard Business Review, which advises leaders to be skeptical of a massive regionalization wave and to focus on economic fundamentals like production costs and demand. While geopolitical tensions are a new factor, businesses are warned against locking into higher-cost supply chains, as significant government support for relocation will likely be limited to only the most politically sensitive industries. This suggests that what many now call friendshoring, relocating to allied countries, may become more important than pure nearshoring in strategic sectors.

If companies choose to nearshore, they must focus on building strong supply chains and look for or develop suppliers to meet their standards and that of their destination markets. Similarly, closely monitoring the tariff landscape, especially in Mexico is essential. Javier Zarazua Ruiz, Managing Partner, JL Nearshoring Mexico, urges companies to prepare different contingency plans to face the uncertainty surrounding Trump’s trade policy. “Companies cannot afford to remain passive. They should be actively preparing for multiple scenarios, at minimum, a best-case and a worst-case plan. What if Trump raises reciprocal tariffs on China back to 60% or even 80%? This would represent a worst-case scenario for many global supply chains. Each scenario or some combination of them, is entirely possible. The bad news? There is still no definitive clarity, and CEOs will need to exercise patience for a little longer,” he adds.

Follow our MBS 2025 tag and don’t miss our coverage leading to Mexico Business Summit 2025 on October 28–29, 2025. On Tuesday, June 24, 2025, we will delve into the impact of tariffs on Mexico’s investment attractiveness.

Interested in staying ahead in the nearshoring landscape? Mexico Business Summit 2025 offers exclusive insights from leading industry experts and government officials on the key trends, risks, and opportunities fueling Mexico’s emergence as a global nearshoring powerhouse. Discover how supply chain innovations, workforce development, and sustainability strategies can strengthen your competitive edge.

Register now to secure your place and position your business at the forefront of this dynamic market: https://mexicobusiness.events/MBS/2025