Nearshoring: How We re Doing Month by Month | Monthly Newsletter #14

How´s the Trade Balance Doing? – March 2025

In the first quarter of 2025, Mexico’s trade balance posted a surplus worth $1.097 billion dollars, in contrast to the -$2.706 billion USD deficit recorded a year earlier. Historically, Mexico’s trade balance tends to show a surplus during periods of economic weakness, mainly due to a slowdown in imports. During this period, total exports reached $149.253 billion USD, which signals an annual growth rate of 4.0%, driven mainly by the increase in manufacturing exports (+5.5%). As for imports, these totaled $148.156 billion USD from January to March, logging a moderate annual growth rate of 1.3%. Within the breakdown, intermediate goods increased 3.8% y/y, while consumer and capital goods fell -5.6% and -7.5%, respectively.

Mexico´s Exports to the United States

In March 2025, Mexican exports to the United States reached $47.982 billion dollars, and recorded an annual growth rate of 15.4%, signaling – in part – the seasonal effect of Easter in 2024 and the increase in U.S. imports ahead of tariff hikes. From this amount, $22.696 billion dollars (47.3%) corresponded to exports under the U.S.-Mexico-Canada Agreement (USMCA), while the remaining 52.7% took place outside the scope of said treaty.

The large share of exports outside the USMCA framework is especially significant amidst the United States’ recent trade policies. Since March 2025, the U.S. administration has imposed a 25% tariff on Mexican products that do not comply with the USMCA’s rules of origin, directly affecting more than half of Mexico’s exports sent to that country.

Despite these measures, certain sectors logged strong performance. Machinery exports increased 69.1% annually, totaling $5.253 billion dollars, while under the USMCA they rose 12.2%, reaching $1.702 billion. In this sense, machinery exports shipped within the USMCA framework account for just 13.2% of the total amount. The automotive sector, which is traditionally strong in bilateral trade, increased 6.6% annually overall ($12.271 billion dollars), with an even greater rate of growth (14.6%) under the USMCA ($10.543 billion). Electronics and technology exports also posted annual growth of 4.9% overall, with a solid 9.3% increase under the USMCA.

In contrast, sectors such as food logged a -7.2% annual decline, with a similar -7.4% drop in USMCA exports; energy and minerals decreased -21.2% annually overall, while under the USMCA the decline was more moderate (-6.0%); and non-automotive transportation posted a -10.6% annual drop overall and an even deeper -23.2% decline within the USMCA framework, signaling the specific challenges faced by each segment, possibly tied to regulatory constraints, shifts in demand, and volatility in international prices.

Overall, while Mexican exports to the United States recorded solid growth in March of 2025, the large share of shipments outside the USMCA makes them vulnerable to additional tariffs, which could hurt their competitiveness in the short term. Sustaining export momentum will require progress in reconfiguring supply chains and strictly complying with the agreement´s rules of origin. It’s worth noting that, according to recent Census Bureau data, Mexico remains the United States’ top trading partner, accounting for 15.0% of total U.S. imports. The decline of other countries in the sample is explained by heavy imports of non-monetary gold from Switzerland and Ireland

How Are Things Going with U.S. Tariffs?  

In the first quarter of 2025, the U.S. trade deficit stood at -$466.3 billion dollars, compared to -$278.5 billion in 1Q24, signaling a 67.4% y/y increase. Within the deficit, exports reached $538.7 bn USD from January to March this year (vs. $517.2 in Jan-Mar 2024), a modest 4.2% increase versus the same period in 2024, while goods imports totaled $1.005 trillion USD in 1Q25 (Jan-Mar 2024: $795.7 bn USD), posting a 26.3% y/y surge compared to 1Q24, according to seasonally adjusted figures.

Regarding imports, some categories recorded increases of over 100%. For example, processed metals (such as rods, sheets, pipes, etc.) increased 8.5 times between 1Q24 and 1Q25; cocoa beans doubled; and non-monetary gold rose 1.7 times. Similarly, imports of pharmaceutical products increased 97%, computer accessories 82%, green coffee 81%, and tin climbed 72% during the same period. On the other hand, coal imports dropped 66% y/y, sugar (cane and beet) fell -32%, excavation equipment declined -27%, and railroad transportation equipment fell -19%, according to the Census Bureau report.

25% Steel Tariffs

Regarding the 25% tariffs on steel and steel related products, U.S. imports from around the world decreased -2.2% y/y in March 2025, and totaled $4.095 billion dollars, according to our estimates. Breaking it down by country, China reduced its trade with the U.S. by -$96 million USD in March; however, Taiwan, Vietnam, India, and Thailand increased theirs by $119 million USD, suggesting the Asian giant managed to redirect part of its trade through other countries. Additionally, Mexico cut its exports to its northern neighbor by -$95 million USD, Canada by -$37 million USD, and South Korea by -$53 million USD. Thus, regarding accumulated figures for the first quarter of 2025, imports of steel and related products subject to the tariff logged a moderate increase (1.6%). Moreover, Vietnam logged a 40.5% increase, emerging as the main winner amidst the implementation of steel-related tariffs.

Regarding the forecasts that we estimate for Mexico´s economy, we found that within the Top 10 steel and steel-related products that Mexico exports to the U.S. (which account for 54% of the total amount), figures are mixed, although they show a downward trend. On the one hand, products used in construction and electric water heaters rose 6% and 10%, respectively, while items such as metal furniture and decorative structures used in doors plummeted -59% and -88%, respectively. Overall, the impact signals a negative trend for Mexico.

25% Aluminum Tariffs

Regarding the 25% tariffs on aluminum and aluminum-related products, we found that in March 2025, they totaled $8.304 billion USD, recording a -3.8% decline compared to the same month last year. After looking at the figures, we found that Southeast Asia increased its sales to the U.S. and gained market share. For example, China’s share rose from 19% to 20%, Vietnam’s from 3.4% to 5.1%, Taiwan’s from 4.2% to 4.9%, and Thailand’s from 1.8% to 2.5%. As a result, Southeast Asia’s share rose from 28.5% in 1Q24 to 32.5% in 1Q25. On the other hand, Mexico decreased its exports -6.1%, though it remained the top supplier of these products to the U.S., with a 22.4% market share. Like Mexico, other economies that logged export declines were Canada (-4.0%), South Korea (-32.9%), Japan (-6.0%), and Germany (-26.4%).

Thus, in the first quarter of 2025, imports of aluminum and aluminum-related products subject to the tariff rose just 0.1%, despite declines of -21.2%, -16.4%, and -5.7% in trade with South Korea, Germany, and Canada, respectively. For Mexico, the quarterly drop was -1.9% y/y.

When reviewing the top 10 aluminum and aluminum-related products subject to tariffs that Mexico exports — which account for 70% of all imports in this category — we found an almost widespread decline across all segments, except for some refrigerator and freezer parts, which increased 11%. In this regard, imports of bumpers and their plastic components, which make up nearly half of the top 10, dropped -10%. Similarly, train parts fell -16%, telephone equipment parts -30%, metal furniture -59%, and electrical devices used to protect circuits -38%. In this context, Mexico is being significantly affected by aluminum and related tariffs.

How Are China´s Exports Doing?

In April 2025, Chinese exports far exceeded market expectations by increasing 8.1% year over year versus the consensus estimate of just 1.9%, although moderating from the 12.4% posted in March. This increase came despite the enforcement of a reciprocal tariff of over 100% and an additional 20% tariff imposed by the United States related to fentanyl and migration. Notably, shipments to the U.S. plunged -21%, while exports to other markets more than offset the decline: Vietnam (+36.8%), India (+21.7%), Taiwan (+15.5%), Canada (+15.0%), and the European block (+8.3%). It´s important to highlight the fact that April´s figures are preliminary and subject to revision, so in-depth analysis relies on the January–March 2025 cumulative data.

Analyzing March´s exports by category, the strongest momentum came from the “other products” segment, which increased 27% year over year and contributed an additional $8.9 billion to total exports, signaling a rebound in diversified manufacturing and consumer goods. The electronics and technology sector increased 13% year over year, totaling $9.3 billion, driven by strong global demand for electronic components, semiconductors, and advanced devices. Machinery rose 14% (+$6.6 billion), while the automotive segment posted a more moderate increase (10%), equivalent to an additional $1.6 billion. In contrast, energy and mineral exports decreased 10%, showing relative weakness in a segment that´s historically sensitive to price fluctuations and regulatory changes.

Regarding the United States, despite the additional 20% tariff that´s been in effect since March, total exports rose 9% year over year in the January–March period, totaling $40.06 billion. The strongest gains came from electronics and technology (+16% y/y, +$1.3 billion) and energy and minerals (+24%), although the net amounts remain modest. Conversely, machinery declined -6% (-$432 million) and non-automotive transport plunged -30% (-$107 million), while the automotive sector remained virtually flat. However, April´s data already shows a sharp reversal: exports to the U.S. dropped -21% year over year, signaling the distortions caused by front-loaded orders, the over-100% tariff imposed by Trump starting April 9^th, and the easing of tariffs on the rest of the world to 10% (down from 10%-50%) for 90 days.

Overall, in April, China’s exports signaled that U.S. demand slowed sharply due to tariffs and the prior month’s order front-loading. However, it’s important to highlight that the 90-day pause in reciprocal tariffs and the cut in the global tariff rate to 10% (excluding Mexico and Canada) could be behind the rebound seen in the rest of the world— part of China’s strategy to continue trading with the U.S. via alternative export destinations or rerouted supply chains. At the time of writing, a cut in the tariff to 80% is under consideration—still very high and disruptive, but possibly an early sign that tariff easing could begin to take shape. However, with Trump, conditions could shift before any potential deal materializes.

As part of the agreement with China, both countries reduced their tariff rates—China from 125% to 10%, and the United States from 145% to 30%. The reason U.S. tariffs remain higher is because duties on cars, as well as steel and aluminum products, are still in place, along with the 20% fentanyl-related tariffs.

As part of the deal, both countries agreed to keep current tariff levels in place for 90 days while broader negotiations continue. Additionally, China also committed to canceling or suspending some non-tariff trade measures introduced earlier this year and to easing restrictions on critical mineral exports.

Conclusions

The most recent news suggests that Trump’s stance on tariffs has softened, with announced agreements reached with both China and Japan. The trade war has caused distortions in the flow of goods and financial capital, and it´s already had a direct impact on U.S. economic growth.

It’s still unclear what Trump’s tariffs are truly intended to achieve—whether they aim to close the U.S. trade deficit with the world or serve as a pressure tactic to secure better terms for the country.

We believe the latter is more likely. And despite the recent improvement in the trade environment, tariff levels are now higher than they were at the beginning of the year, which will create both winners and losers across sectors.

For Mexico, while there has been some impact on trade flows, the country’s relative position remains favorable thanks to goods traded within the USMC´s framework. Although these currently account for only 47% of Mexico’s exports, there’s significant potential for that share to grow substantially.