As China Falters, Mexico Rises
As supply chains and jobs flee China, Mexico is capturing an outsized share. There’s a reason, and it's good for America.
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by Rod D. Martin
April 14, 2026
China is losing its grip on global manufacturing, and one of the biggest new winners is Mexico.
That does not make Mexico a rival in the way it did China. North America is reorganizing around American power at exactly the moment China is becoming older, costlier, riskier, and weaker. Mexico is rising not against the United States, but because it is plugging itself more deeply into the only industrial system on Earth that is actually positioned to win.
The sheer size of the bilateral relationship is remarkable. U.S. goods trade with Mexico reached $872.8 billion in 2025, with U.S. exports at $338.0 billion and imports at $534.9 billion. In 2023, Mexico replaced China as America’s largest source of imports, a position China had held for twenty years.
That’s a quiet revolution. For years, the world economy rested on a simple arrangement: America consumed, China manufactured, and the foreign policy class pretended this was both permanent and wise.
It was neither.
Quite apart from the fact that a generation of American presidents needlessly enabled China’s rise as a geopolitical threat, the arrangement depended on a China that was cheap, young, politically stable, and willing to serve as the workshop of the American consumer.
That China is disappearing. One reason is simple economics: China’s old labor-cost advantage has eroded. Another is politics: tariffs, sanctions risk, Taiwan risk, shipping disruptions, and the larger danger of dependency on a supply chain centered on an increasingly adversarial power.
But beneath all of that lies demography. China currently has a Total Fertility Rate (TFR) of 0.92. 2.1 is necessary simply to replace the current population, but there is virtually zero possibility of China getting anywhere near that in this century. If, as demographer Yi Fuxian has shown is most likely, China’s TFR stabilizes at 0.8, that means a loss of 75 percent of the country’s population over the next 75 years.
If that bears out, the United States will be larger than China. But first, a ballooning elderly class will have to be supported by a permanently shrinking working class that has invested heavily in real estate for which there will soon be an ever-declining market of buyers or renters.
That’s a prescription for economic catastrophe. The full force of it may take another decade to unfold. But it is already too late to stop.
By contrast, Mexico has a TFR similar to the United States, and unlike China, it can attract significant immigration. It sits directly beside the richest consumer market in the world. It is inside a North American trade architecture China can never match, and never become part of.
Goods can move by truck instead of crossing the Pacific. Components can crisscross the border multiple times during production. Industrial planning that once meant “find the cheapest labor” increasingly means “move closer to the American customer, closer to American capital, and closer to American political protection.”
This is no longer just a wage story. A factory in northern Mexico is not “offshore” in the same way as a factory in China. It is part of a continental production system. It is connected by highways, rail, energy flows, cross-border manufacturing relationships, and legal trade arrangements that bind the continent together.
The old model was “make it in China and ship it to America.” The new model is “make it in North America, with the United States at the center and Mexico as a crucial industrial extension.”
Ross Perot’s “giant sucking sound” is no longer a serious factor. Mexico is draining industrial share from China, not hollowing out America. Mexican factory wages are up 344 percent since NAFTA was ratified, thus muting the appeal for American companies to shift additional factories south.
That’s a big jump. But Chinese wages are up more than 1,000 percent. Countries still dependent on cheap labor increasingly want out of China. Moving to Mexico provides it. It provides tariff relief too.
The big movement now is not Pennsylvania losing jobs to Monterrey. It is China losing jobs to North America, both Pennsylvania and Monterrey.
That is a very different thing.
The large shift now is from a hostile, distant, aging, increasingly expensive Asian manufacturing platform into a continental system centered on the United States. That is why the old anti-NAFTA critique no longer describes the dynamic. What is happening now is not America exporting its industrial base: it’s America reassembling its industrial sphere. The Dallas Fed explicitly ties Mexico’s gains to U.S.-China tariffs, pandemic disruption, and the rising benefits of long-term manufacturing integration between the United States and Mexico.
In short, all that 1990s pain is finally paying off, now at China’s expense.
There’s another reason it’s different now. The United States itself is reindustrializing.
Since President Trump returned to office, he’s recruited more than $18 trillion in new investments into U.S. manufacturing, technology, energy, and infrastructure, along with massive AI, semiconductor, energy, and industrial commitments. That’s nearly two-thirds of America’s GDP flowing into the country, not out, largely from the outside and creating American jobs.
That’s unprecedented. And the reasons are clear: Trump’s tax cuts, massive deregulation, and promise not to impose tariffs on companies that build at least part of their industrial plant here in the United States. Whether every one of those $18 trillion dollars arrives on the exact timeline advertised is immaterial: capital is pouring into the U.S. side of the North American system, particularly in the most advanced, high-wage, strategic sectors.
That is Trump’s strategy in a nutshell. America gets the fabs, the energy, the software, the high-end machinery, the engineering, the finance, the data centers, and a large share of the heavy capital investment. Mexico gets what China sheds: more assembly, more autos, more electronics, more industrial scale, and more of the mid-complexity manufacturing leaving China. And Trump is doing everything in his considerable power to accelerate that departure.
That’s the point. We are no longer talking about America growing poorer so Mexico can grow richer, in the way that Bill Clinton, George Bush, and Barack Obama did. We are talking about an American economy so large that it needs nearby help, growing stronger together because production is shifting into a system organized around American capital and American strength.
China built its entire economy and future on exports, with the U.S. as its most essential customer. Now it’s losing share partly because of its hostility, but partly because it’s no longer the dirt-cheap workshop it once was. Success changed the math. Japan experienced the same thing, but with a more positive result: in the language of economic development, it got rich before it got old. China got old before it got rich.
A similar process can take place in Mexico, but in a way that more directly benefits America. As Mexico gets richer inside an American-led system, it becomes less of a wage-arbitrage story and more of a consumer story. Mexico is already one of America’s biggest export markets. A richer Mexico means more demand for American machinery, energy, food, technology, finance, and services. In Trumpworld, we do not become stronger by impoverishing ourselves, or by keeping our neighbors poor. We become stronger by pulling them into a system in which our strength and their success make everyone richer together. It’s the Trump Doctrine yet again, “commerce, not chaos.”
This is also why Mexico’s future is not fundamentally a question of ideology. It’s a question of reality.
Mexico has always had an ambivalent relationship with the United States. Geography placed Mexico next to the most powerful country in the world, one that competed with it for primacy in the nineteenth century and has dominated the continent ever since. But geography does not care about sentiment. Mexico is too close to America to balance against America, too integrated with America to detach, and too full of opportunity to ignore the richest consumer market on Earth. It does not really get to choose a grand strategy independent of the United States. It gets to choose whether to profit from American ascendancy or be damaged by opposing it.
Years ago, George Friedman said that both Mexico’s strength and its vulnerability are tied to the same fact: its deep dependence on the American market.
That’s not an insult to Mexico. It’s just the world we live in.
Trump is the first president since Reagan to act as if America has real leverage and actually use it. For decades, Washington’s uniparty establishment treated American power as deeply embarrassing. They believed in abstractions, global consensus, rules-based sermonizing, military overreach to take care of dependent “partners”, and above all, lopsided trade deals that always opened American markets while allowing everyone else’s to remain at least partly closed to us.
This was not free trade in any meaningful sense. It was a global subsidy by the American taxpayer, and far too often, thinly-disguised bans on American competition.
Trump does not think that way. He treats access to the American consumer market, the American dollar system, and American security guarantees as bargaining chips to get the best deal for Americans: to put “America First”. That is not “America Only”. It’s just a recognition that Americans count too, especially when they’re providing security to the whole global system, and that the people they elect to lead them should primarily be concerned with their aspirations and needs.
That’s exactly why Mexico is rising, especially vis-à-vis China. Trump’s reset is forcing a reordering of trade and supply chains around American priorities. The first Trump tariffs helped start the break in the old China-centered model. The second Trump term is accelerating it. And because the American economy is vastly larger, less export-dependent, and more central to world demand than all possible trading partners, the correlation of forces works inexorably in America’s favor.
But the truth is bigger than trade. The United States is indispensable. And it’s becoming more indispensable, not less.
Europe is stagnant, overregulated, strategically dependent, and increasingly unserious. China is straining beneath the weight of its own contradictions. Russia is a declining gas station with nukes. BRICS is a joke: ask Iran.
The United States alone combines the world’s deepest capital markets, the reserve currency, enormous energy and food abundance, unmatched military reach, a gigantic domestic market, and a continental-scale production base protected by oceans and friendly neighbors. That is not just primacy. That is structural advantage becoming more obvious by the year.
That is the real meaning of Mexico’s rise.
Unlike China over the last three decades, Mexico is in no danger of becoming a peer power to the United States. It has too many internal constraints, too much regional unevenness, too many geographical limitations, and too much structural dependence on America for that.
But Mexico doesn’t need to become a peer power to become rich. It only needs to become what geography has prepared it to be: the indispensable industrial partner of an American-led North America. And that, in turn, tells us something larger about the century now taking shape.
This new American century will not be built on global handouts, post-national fantasies, or the comfortable lie that all countries are interchangeable nodes in one frictionless globalist system. It will be built on power, production, geography, and leverage. It will be built by pulling supply chains closer to home, by rewarding partners who align with American strength, by forcing adversaries to bear the cost of opposition and aggression, and by building prosperity inside the American sphere instead of outsourcing it to rival civilizations.
China is faltering. Mexico is rising. America wins.
That is not an accident. It is what reality looks like when a great power finally decides to act like one.
UK got Socialism in all its guises, getting ‘equality’ means lower down the ladder of life/health/culture
I worked at a couple Mexican factories at my old job. Nice, hardworking people. But the neighborhoods were a bit scary.
We heard a big splash about six weeks ago concerning taken down the cartels. I wonder if we’re still making progress on that front. It’s gone quiet.