The Unexpected Winner of Rising American Tariffs Is Mexico
The country’s exports to the U.S. have surged since President Trump imposed new duties on countries this year
Dec. 26, 2025 The Wasll Street Journal
MEXICO CITY—When President Trump began raising tariffs earlier this year, government officials and economists feared Mexico’s export-led economy would take a devastating hit. Instead, Mexican exports to the U.S. have grown.
Because Mexico’s ultimate tariff rate ended up lower than for most other countries, the disparity has helped Mexican exports fill some of the gap left by Chinese products subject to higher levies.
Producers seeking a foothold in the U.S. have said that Mexico still has all the inherent advantages it had before tariffs—proximity to the U.S., a low-cost manufacturing industry and a frayed but intact free-trade agreement.
Even with steep tariffs on autos, steel and aluminum bound for America, Mexican manufacturing exports to the U.S. rose almost 9% from January to November, compared with the first 11 months of 2024, according to Mexican government data. Auto-industry exports to the U.S. fell close to 6% during the period, but exports of other manufactured goods surged 17%.
Trade in goods between the U.S. and Mexico is on track to reach a record of nearly $900 billion this year.
Mexico’s economy is projected by its central bank to expand 0.3% in 2025—anemic but far from the contraction of 1% that was expected by now, said Kathryn Exum, co-head of sovereign research at Gramercy Funds Management, which manages about $7 billion in emerging-market assets.
The Nearshore Co.’s experience illustrates how Mexico dodged a bullet in Trump’s trade war. The company helps foreign manufacturers produce U.S.-bound goods in Mexico through its network of 18 industrial plants, mostly located along the border.
Jorge Gonzalez Henrichsen, co-chief executive at the company, said many manufacturing-investment plans had been put on ice earlier this year until companies had more clarity on the tariff levels for Mexico and other countries. Then came April 2—Liberation Day, as Trump calls it.
The president stood outside the White House with placards listing new tariff rates for almost every country—excluding Mexico.
Gonzalez Henrichsen said he quickly received an avalanche of calls from people who wanted to restart manufacturing projects in Mexico that they had paused because of incoming tariffs. His clients concluded that Mexico was better off than many other U.S. trade partners, including rival manufacturers in Asia.
“In fact, it was Liberation Day for us,” said Gonzalez Henrichsen.
Mexico also overcame concerns about a “zombie” U.S.-Mexico-Canada Agreement, a term used to describe a scenario in which North America’s free-trade deal remains but is undermined by unilateral tariffs.
Today, almost 85% of Mexico’s total exports remain tariff-free under the USMCA.
Mexican President Claudia Sheinbaum has worked hard to engage Trump and manage his use of trade as leverage on noneconomic issues. She has tightened drug enforcement along the border, expelled imprisoned cartel bosses wanted by the U.S. and imposed 50% tariffs on Chinese-made vehicles and other goods, defusing U.S. threats of harsher tariffs.
“Mexico has approached the relationship with the U.S. quite constructively,” said Exum of Gramercy.
Mexico still faces the highest tariffs in a generation: 25% on non-U.S. content in autos, up to 50% on aluminum and steel and 25% on non‑USMCA‑compliant exports imposed because the U.S. has said Mexico hasn’t done enough to curb drug flows.
Competitors including China are stuck with steeper duties. According to the Penn Wharton Budget Model, Mexico’s effective tariff rate is 4.7%, compared with 37.1% for China. The overall effective rate for the world is about 10%, according to Penn Wharton, reflecting all layers of taxation, deductions, credits and exemptions.
U.S. Trade Representative Jamieson Greer said Mexico has managed to capture about 25% of the reduction in the U.S. trade deficit with China. The shift demonstrates “the important role that Mexico plays in U.S. supply-chain resilience efforts,” Greer told U.S. lawmakers in mid-December.
Mexico overtook China as the top foreign-goods supplier to the U.S. in 2023 and has become its largest buyer, owing to deep regional manufacturing integration and a large, young, low‑cost labor pool. Many of Mexico’s U.S. imports are intermediate goods used to produce exports back to the U.S.
Other elements strengthen Mexico’s position. Proximity to U.S. markets cuts transportation costs for goods such as autos.
“The level of integration is such that the cost of eliminating the USMCA would be monumental,” said Luis de la Calle, who served on the Mexican team that negotiated the North American Free Trade Agreement more than three decades ago.
Many companies expect global trade uncertainty to be long-lasting, said Antonio Ortiz-Mena, chief executive of AOM Advisors, a trade and investment consulting firm. Mexico and Canada are likely to continue having lower average tariffs than the rest of the world, reducing uncertainty as the U.S.-Mexico-Canada Agreement is up for review in 2026.
“While it won’t be a perfect agreement, we are heading in that direction,” Ortiz-Mena said.
Mexican shipments of data-processing equipment more than doubled this year, bolstered by the U.S. build-out of data centers and artificial intelligence. Gonzalez Henrichsen of the Nearshore Co. said strong demand boosted output of electric transformers for data centers by a U.S. customer that began operations in Mexico in 2019 with one plant and 18 employees. Now the customer has four plants and 600 workers, with another 1,000 expected to be hired next year.
“We haven’t had any clients close down and pack up to the U.S.,” he said.
Write to Santiago Pérez at santiago.perez@wsj.com and Anthony Harrup at anthony.harrup@wsj.com