The US-China Trade War and the Relocation of Global Value Chains to Mexico

Using confidential longitudinal firm-level trade data from Mexico (2015–2021), we examine whether the 2018/19 US-China trade war triggered adjustments in Global Value Chains (GVCs) and nearshoring to Mexico. Leveraging the abrupt US trade policy shift as a natural experiment, we construct firm-level trade policy exposures based on pre-shock product portfolios and find that US tariff hikes on China significantly increased Mexican firms’ exports to the US, imports from Asia and the US, and net exports overall. By distinguishing IMMEX export-platform firms and identifying their parent countries, we show that GVC participant firms—particularly foreign multinational enterprises (MNEs)—were the primary channels of this adjustment, with export growth concentrated in technology-intensive industries and driven largely by existing intermediate products. The trade war also reshaped sourcing patterns, boosting the use of firm-specific duty permits. Heterogeneous responses between US and non-US foreign MNEs highlight nearshoring dynamics and GVC reorganization toward Mexico. These findings provide firm-level evidence of the transformative impact of trade policy on GVCs and the pivotal role of MNEs in channeling trade policy spillovers to third countries.