Currently, Mexico holds a significant advantage over the United States, which could impede the progress of the ‘Made in America’ initiative.

The ongoing challenge for US businesses pushing for increased domestic production is the difficulty in finding an available workforce, driven in part by the country’s low unemployment rate. Christian Ulbrich, CEO of JLL, highlights that the scarcity of available workers in the US contrasts sharply with Mexico, which is experiencing growth in its manufacturing base. This dynamic could attract companies to invest in supply chain operations in Mexico rather than the US.

Despite some corporations, like General Motors and Intel, announcing plans to bring back supply chains and manufacturing to the US, labor force shortages pose a significant obstacle to the “Made in America” initiative. Global disruptions, such as the COVID-19 pandemic, geopolitical events, and environmental concerns, have prompted certain US businesses to consider near-shoring or friend-shoring in countries like Mexico. This strategy involves relying on countries that are physically and politically close, offering cost advantages compared to the US.

Mexico’s attractiveness is further enhanced by lower labor costs than in the US and China, along with a younger median age contributing to a robust labor supply. Mexico has surpassed Canada and China to become the top trade partner for the US, accounting for over 15% of goods exchanged. However, challenges such as limited infrastructure, inconsistent energy and water supply, and security concerns may warrant careful consideration for businesses investing in Mexico.

Despite the competition, experts suggest that the US and Mexico can complement each other in supply chain investments. While some drawbacks exist in near-shoring to Mexico, such as complicated labor laws and security issues, manufacturing in the US could offer reduced supply chain disruptions and lower transportation costs.

To address the labor supply challenge, businesses may need to offer competitive pay and benefits, utilize contract or subcontract employees, invest in training programs, and, where applicable, consider increasing immigration levels. The decision to invest in “Made in America” initiatives ultimately rests on corporations evaluating the cost-benefit equation.

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