LM reader survey drives home the ongoing rise of U.S.-Mexico cross-border trade and nearshoring activity

Looking back at 2023, one of the more notable things coming out of the year was that it marked the first time in two decades that the United States imported more goods from Mexico than China, rising 4.4% annually, to $480 billion, coupled with U.S.-bound imports from China off 20% annually, according to U.S. Census bureau data.

These data points, in various ways, highlight the ongoing emergence of Mexico—not only as a major cross-border trading partner, but also as a global manufacturing hub as well, coming with significant supply chain- and logistics-related implications.

That was made clear in recent Logistics Management reader survey of more than 100 freight transportation, logistics, and supply chain stakeholders.

The survey’s findings were largely positive, in terms of the attitude and approaches shippers are taking to setting up shop in Mexico, coupled with the ones that plan to make inroads there.

For example, 80% of respondents stated they currently have logistics operations in Mexico, ranging from one year to 20 years, across a plethora of services, including: auto parts manufacturing; packaging and kitting services; produce; transportation and customs brokerage; and contract logistics services, among others.

What’s more, 93% of respondents stated that they plan to establish future operations in Mexico, with many citing the expansion opportunities it offers for their companies. But, at the same time, there are other considerations that need to be factored in as well.

“Establishing logistics operations in Mexico can be advantageous due to its strategic location, extensive trade agreements, growing economy, cost efficiency, and improving infrastructure,” noted a respondent. “However, potential challenges such as regulatory compliance, security concerns, and infrastructure limitations should be carefully considered before deciding.”

Reasons cited by those respondents not planning on making the move into Mexico ranged from safety and security to focusing on U.S.-based operations, not needing to do so, and economic conditions, among others.

Despite these concerns, 57% of respondents expect to see an increase in U.S.-Mexico cross-border logistics and supply chain activity in the coming years.

One respondent put it this way: “Nearshoring has taken hold. It will continue to grow as companies see the benefits of doing business in Mexico,” with another noting that “Nearshoring has become a must.”

Other reasons put forward by respondents for the expected increase included the need to reduce the amount of business they are doing in China, including geopolitical issues and trade tension between the U.S. and China and costs.

“We can expect to see an increase in U.S.-Mexico cross-border logistics and supply chain activity in the coming years, due to factors like the USMCA trade agreement, economic integration, market expansion opportunities, and infrastructure development,” said a respondent.

The push into Mexico or on the U.S.-Mexico border—whether to establish or increase operations has been ongoing for a while, especially in recent months.

Some recent notable examples of that include:

• C.H. Robinson’s September 2023 announcement to open a 400,000 square-foot facility comprised of 154 dock doors with room for 700 trailers while expanding its Mexican border footprint to 1.5 million square-feet.
• Ryder System opening up a new multi-client warehouse in Laredo, Texas and expanding its Nuevo Laredo, Mexico-based drayage yard in February, followed by the opening of a
• a second multiclient facility logistics facility in El Paso, Texas in close proximity to the Ysleta Port of Entry, which it said is the largest commercial port in the El Paso district, as well as a critical trade corridor for northbound goods out of Juarez, Mexico; and
• Echo Global Logistics saying in March it has expanded its cross-border services in Mexico, following eight years of managing southern border shipping services, with new locations Mexico City, Monterrey, and Laredo, Texas

“Mexico has without a doubt been a major beneficiary of this [nearshoring] trend,” Mike Burkhart, C.H. Robinson’s Vice President for Mexico, told LM. “For example, we recently helped an automotive customer shift their entire supply chain to a 50-50 split between eastern Europe and Mexico. In 2023, Mexico became the United States’ No. 1 trading partner—topping both China and Canada—and nearshoring now accounts for about 1 of every 4 square feet of industrial space in Mexico. Why Mexico? Instead of your product taking a five-week trip from China to the United States, a five-day trip from Mexico is pretty attractive. But Mexico is a magnet not only because of its proximity to U.S. consumers. Companies are moving more manufacturing to Mexico because of its good access to inputs, its labor force and its trade incentives. Mexico offers some of the most free-trade agreements of any country.”

And AFS Logistics President Tom Nightingale observed that there is tremendous potential for further logistics inroads both into and out of Mexico, in terms of the shortening of the overall length of haul, as industry stakeholders try to get production and consumption closer to each other, while also shortening the overall length of haul, both cross-border and domestically.