Nearshore Manufacturing in Mexico is a Boon to the U.S. Economy

It’s no secret that labor costs in China are rising rapidly and will soon be significantly higher than wages in Mexico; in 2012 unit labor costs were equal to those of China, by 2015 they are projected to be 29% less expensive.  As well, it’s common knowledge that Mexico has more free trade agreements than any other country. What is not so widely discussed is how much choosing Mexico for a manufacturing location is a benefit to the U.S. economy.

The fact is Mexican factories use four times as many American-made components as Chinese factories.  And that number is only expanding with the continued growth of nearshore manufacturing in Mexico which today accounts for 35% of the county’s GDP (vrs. 12% in the U.S.). As a result, Mexicans have more money to purchase American consumer products such as beef, again benefiting the U.S.

With the concentration of industry manufacturing clusters such as automobile and appliances, and 50 to 170% lower industrial natural gas costs, Mexico is not just poised to overtake China in manufacturing, it is well on the way. And that is all to the benefit of the United States. For further details see this article.