Tariff Fallout: Is This the End of Nearshoring?

International trade is facing a challenging landscape. Donald Trump's decision to impose a 25% tariff on imports from Mexico and Canada, along with an additional 10% tariff on Chinese products, has set off alarm bells in key sectors. For logistics and freight transportation, this tariff dispute is not just an economic issue, it represents a shift in the rules of the game that could impact costs, delivery times, and trade dynamics.

I have identified four immediate effects. First, rising costs, which force logistics companies to either absorb or pass them on to customers, affecting the entire supply chain.

Another major impact will be customs congestion. The introduction of new trade barriers will lead to an increase in inspections, paperwork, and wait times at border crossings, reducing transportation efficiency. As a result, companies may be forced to cut back on imports or seek alternative sourcing for their products.

Third, route reconfigurations could drive up container or per-unit transportation costs, affecting the efficiency of shipping companies and carriers. Finally, longer wait times at ports will lead to additional storage costs and delivery delays.

Given these effects on the logistics sector and cross-border trade dynamics, the immediate question arises: Will the companies that arrived in Mexico during the nearshoring boom leave? My answer is clear: nearshoring will not disappear, but it may slow down temporarily.

The first reason is that export costs will undoubtedly rise, reducing the competitiveness of Mexican-manufactured products compared to local alternatives produced in the United States.

Additionally, tariffs bring an atmosphere of uncertainty regarding future investments. Companies require stability to plan expansions or open new plants, and an unclear trade environment may prompt them to reconsider their operations in Mexico.

In this regard, I believe the most affected industries will be automotive and electronics, which heavily depend on exports to the United States. In fact, half of the cars sold in the United States are manufactured outside the country; of those, 16.5% arrives from Mexico. Multinational companies will face a predicament: Relocate investments? Increase prices despite the risk of declining sales? Absorb tariffs or deal with the consequences? There will be no easy answers.

Given this scenario, it’s important to highlight key nuances:

• Mexico remains attractive despite tariffs. The country continues to be the best option in terms of geography, logistics, and labor costs.

• Existing investments will not disappear overnight. Companies with plants in Mexico won’t shut down suddenly; instead, they will seek cost adjustments and export strategy shifts.

• The United States also needs Mexico. If US trade policy aims to reduce reliance on China, in the long run, the economic relationship between both countries could strengthen.

Despite the challenges, nearshoring in Mexico remains on solid ground. However, if trade tensions escalate, some companies may start looking elsewhere. What is certain is that logistics and strategic planning will be more critical than ever for the competitiveness of global trade.

Ilan Epelbaum is the Director General of Mail Boxes Etc. in Mexico (MBE), where he leads business relationships and negotiations with commercial partners while overseeing the company's positioning in the country. He is also responsible for managing relationships with MBE franchisees in Mexico and, more broadly, for the company's expansion across the country.