Elsewhere in North America: How U.S. Tariffs on China Boosted Mexico's Manufacturing Employment and Output

Using administrative longitudinal firm- and plant-level data from Mexico that links manufacturing firms to their customs records and covers the period 2014–2023, I examine whether US tariffs targeting China have contributed to a manufacturing revival in the southern part of North America. Leveraging the abrupt shift in US trade policy as a natural experiment, and constructing firm-level trade policy exposure measures based on firms’ pre-shock trade portfolios at the product level, I show that higher US tariffs on China significantly increased manufacturing output and employment. Adjustment occurs along both intensive and extensive margins, through expansion of existing plants and the establishment of new manufacturing plants by incumbent firms. Foreign multinationals and their domestic affiliates operating under Mexico’s export platform, IMMEX, drive these gains in manufacturing output and jobs, with U.S.-headquartered firms making a particularly notable contribution. The employment response is concentrated among production workers and technicians, particularly in technology-intensive industries embedded in North American supply-chains. These findings provide firm-level evidence that heightened import protection in the United States has stimulated manufacturing activity elsewhere in North America — namely, in Mexico.