“Fine-tuned” and stable tariffs: global winners and losers
The trade war launched years ago between the United States and China has evolved into a more permanent and far-reaching trade policy. The tariffs imposed by the U.S. have been “fine-tuned” and become more stable, and they now extend to other countries as well. In 2025, the U.S. administration maintained and raised many duties: across-the-board tariffs of 10% to 20% apply to imports from dozens of countries, including traditional allies (15% on goods from the European Union, Japan and South Korea; 20% on products from Vietnam, Taiwan or Bangladesh). Strategic sectors have also been specifically targeted: for example, a 100% tariff was announced on imported chips and semiconductors (except those manufactured inside the U.S.). These measures reflect a second phase of the trade war —a “Trade War 2.0”— in which Washington is seeking to close loopholes and prevent its companies from dodging tariffs by routing goods through third countries.
With high tariffs now a lasting fact of life, winners and losers are starting to take shape. Mexico stood out as one of the relative winners, benefiting from trade diversion and the relocation of manufacturing to North America. Mexican exports to the U.S. have grown rapidly, rising more than 20% per year between 2020 and mid-2024. In fact, Mexico overtook China as the United States’ leading trading partner in 2023, thanks to the nearshoring boom and its broad network of trade agreements. By contrast, China has seen its share of U.S. imports shrink, falling from 17.7% to 13.5% of the total between 2020 and 2024. Asian countries such as Vietnam, India, Malaysia and Thailand also captured part of the production diverted from China —at least until Washington’s recent “reciprocal” tariffs began to threaten the profitability of the China Plus One strategy.
Even so, the winners face costs and risks of their own. U.S. companies and domestic consumers are dealing with higher prices and supply chain uncertainty. Stable tariffs have made both inputs and finished goods more expensive; the International Monetary Fund itself raised its 2025 U.S. inflation forecast by a full percentage point (to ~3%) because of these duties. Protected U.S. manufacturing sectors —such as steel, aluminum and semiconductors— gained breathing room against foreign competition, but other industries are facing retaliation and higher costs. U.S. agricultural exports to China, for instance, took another hit: after the new 2025 tariffs, U.S. soybean sales to China fell 67% in a single week in April, and experts warn that many farmers “will have a hard time” under Chinese retaliation. In many respects, the recent trade war confirms that “everyone loses” something: global chains are less efficient, prices rise, and uncertainty weighs on investment.
Nearshoring in Mexico: a historic opportunity, lagging progress
In Mexico, the reconfiguration of global production chains opened up a historic nearshoring opportunity. Geographic proximity, competitive labor costs and the T-MEC (USMCA) framework made the country extremely attractive for relocating manufacturing that had previously been based in Asia. The Mexican government reported a record US$36 billion in Foreign Direct Investment (FDI) in 2023, 27% more than the previous year. More than 400 investment projects (US$170 billion between 2023 and August 2024) tied to nearshoring were announced, including plans by automotive giants such as Tesla, BMW, Ford and GM, as well as Asian automakers such as BYD (China) and Kia. This initial boom positioned Mexico as the main beneficiary of the trend and raised hopes that the country would evolve from a maquiladora hub into a manufacturing innovation hub.
However, the nearshoring frenzy lost steam abruptly in late 2023 and early 2024, leaving projects in limbo. Although total FDI was high, the share of new investment dropped sharply: only US$4.817 billion in “new” capital came in during 2023 (barely 13% of total FDI, compared with 50% in 2022). This indicates that the boom did not translate into as many new plants as expected. In fact, in July 2024 Tesla indefinitely postponed construction of its mega-plant in Nuevo León, cooling one of the flagship nearshoring projects. As a result, planned investments in key sectors such as steel and aluminum —inputs for auto parts— were left in doubt, and several suppliers slammed the brakes on their expansion plans.
The main cause of this lag was the resurgence of trade tensions with the U.S. in early 2025. The arrival of a hostile new U.S. administration shook confidence: Donald Trump, upon returning to the presidency, threatened across-the-board tariffs of 25% on all Mexican imports (on the grounds of curbing drugs and migration) and went as far as initially imposing that 25% on exports from Mexico and Canada. Although he later temporarily exempted vehicles and goods covered by the T-MEC and postponed the full entry into force of these tariffs by a month, the damage to the investment climate was already done. Uncertainty soared, as Mexico saw its preferential access to the U.S. market put at risk. “Companies that were being cautious, waiting to see what would happen, put their projects on hold,” industrial real estate analysts explain. Indeed, Mexican manufacturing employment declined —more than 100,000 jobs were lost in early 2025— reflecting the slowdown in activity.
Against this backdrop, Mexico responded with defensive measures to shore up nearshoring. Starting in April 2024, the López Obrador administration (and later that of President Claudia Sheinbaum) imposed temporary tariffs of 5% to 50% on 544 products imported from countries without a trade agreement (mainly China, India and Vietnam). The decree covered everything from steel, aluminum, chemicals and plastics to textiles, footwear, furniture and musical instruments, with the aim of protecting vulnerable local manufacturers. Officially, these tariffs were said to give “oxygen” to domestic industries battered by cheap imports and to create a fair environment for companies that might invest in Mexico through nearshoring. Many observers, however, noted the geopolitical backdrop: the U.S. was pressuring Mexico to halt the advance of Chinese goods into North America. Experts pointed out that Mexico’s alignment with Washington —“standing up” to China— was largely a response to U.S. concerns that China was using Mexico as a back door into the U.S. market. Nuances aside, Mexico’s strategy marks an unusual protectionist turn, reflecting the priority of consolidating nearshoring even at the cost of trade tensions with Asia.
Amid the tariff “storms,” there are signs of moderate stabilization in 2025. After the initial shock of Trump’s threats, a temporary 90-day trade truce was reached between the U.S. and China, which lowered some high duties and “calmed the waters” beginning in April. That gave investors some relief: companies that had put their Mexican plans on hold resumed talks and project design from the second quarter of 2025 onward. Local executives report a rebound in demand for industrial buildings since April and significant investment plans in border industrial parks. Automotive plant expansions have been revived (for example, BMW in San Luis Potosí to produce electric batteries, and Volvo building a truck plant in Nuevo León). The logistics sector is also showing momentum, with greater demand for warehouses and distribution centers to support the relocation of production.
Even so, the future of nearshoring in Mexico remains contingent on trade certainty. Industry voices warn that triggering a “second wave” of investment will require extending the tariff truce or reaching firmer agreements. The 2026 T-MEC review will also be key, as Mexico will seek guarantees that unilateral tariffs are not repeated. In parallel, Mexico must resolve domestic bottlenecks —infrastructure, energy, water, security and the rule of law— that currently limit its appeal despite nearshoring. The latest projections reflect caution: institutions such as the IMF and the OECD have cut Mexico’s 2025 growth expectations to barely ~1% or less, citing trade uncertainty and its negative “multiplier effects.” As one analysis put it, “nearshoring is in decline,” and the country will only be able to capitalize on it fully if it can secure stable conditions over the medium term. In short, Mexico sees major long-term benefits ahead, but the road has become bumpier than expected.
China: between Asian resilience and lost market share
Seven years after the trade war began, China remains the main protagonist, though no longer the only one. On the one hand, it is clear that China has lost ground in the U.S. market because of punitive tariffs. Chinese exports to the U.S. contracted, as reflected in the drop in its share of U.S. imports from ~18% to ~13%. Likewise, the new round of tariffs in 2025 —including the massive 145% tariff on almost all Chinese goods imposed by Trump— caused an abrupt halt in shipments to the U.S.: ocean freight bookings from China to the U.S. fell between 30% and 60% in April. This sudden drop in trade flows confirms that the barriers have worked to isolate China from the North American market, at least temporarily.
Nevertheless, Asian factories —especially Chinese ones— have shown resilience and ingenuity in continuing to “win market share” by other means. Faced with obstacles to direct access to the U.S., China has redirected its exports toward third countries and emerging markets. Mexico is a clear example: the flow of components and raw materials from China to Mexico has surged, growing 33% in 2023 and another 26.2% between January and July 2024. Many Chinese manufacturers are opening plants on Mexican soil or shipping parts for assembly there, so that the finished product enters the U.S. labeled “Made in Mexico.” This nearshoring of Chinese companies in Mexico changes the “economic nationality” of the goods and allows them to sidestep tariffs as regional products. The trend is so pronounced that analysts describe Mexico as a “back door” for Chinese goods into North America. In fact, in May 2024 an all-time record was set for containers shipped from China to Mexico, confirming this supply chain diversion.
At the same time, China has stepped up its manufacturing footprint in other Asian countries to diversify risk. Since the first tariff war (2018–2019), Chinese companies have expanded production in Vietnam, Indonesia, Malaysia and other neighbors, taking advantage of lower wages and trade agreements. Some of these nations (e.g. Vietnam) gained share as U.S. suppliers during the early stage of the trade war. But Washington’s recent “reciprocal” tariff offensive also reached several Indo-Pacific partners, putting the China+1 strategy in check. This year, the U.S. has demanded that its allies and trading partners reduce ties with China as a condition for avoiding higher tariffs. It is no surprise that countries such as Vietnam and Thailand are now managing their advantages carefully: the 90-day tariff pause in 2025 made it clear that if China manages to lower its export costs (even temporarily), those countries could lose competitiveness unless they negotiate better deals with the U.S. Indeed, Vietnam is already exploring a more favorable bilateral agreement, while others are highlighting their compliance with the T-MEC (in Mexico’s case) so as not to give up the ground they have gained.
Domestically, China is preparing for a prolonged era of trade confrontation. Beijing has displayed a mix of firmness and adaptability: it refused to confirm alleged negotiations that do not exist, while at the same time leaving “the door open” to dialogue. Meanwhile, it is diversifying its imports and exports away from the U.S., strengthening ties with the so-called Global South. Since 2018, China has increased its purchases of soybeans and energy products from Brazil, the Middle East and other alternative suppliers. That mitigates the impact of losing U.S. purchases of grains or hydrocarbons: Chinese officials assert that they can cover their agricultural and energy needs without U.S. products. The Chinese government has also launched diplomatic and commercial initiatives to consolidate markets in Asia, Africa and Latin America, seeking to offset weaker U.S. demand. It is worth noting that only ~3% of China’s GDP depends directly on exports to the U.S., so a decline on that front, while significant, is manageable as long as domestic growth and other markets hold up.
Despite everything, China’s position in global manufacturing remains dominant. Its vast industrial ecosystem, infrastructure and technological capacity are not easily replicated. Experts estimate that Trump’s new tariffs could shave up to 2.4 percentage points off Chinese GDP growth, yet China is sticking to its official 5% annual target and is betting on domestic resilience. Moreover, the U.S. continues to depend on China in critical areas: roughly 60% of the critical minerals the United States imports (key inputs for clean energy, batteries and military technology) come from China. This asymmetric interdependence —China can source food or energy in other markets, while the U.S. would struggle to replace Chinese mineral inputs in the short term— means Beijing retains bargaining power. In sum, China is “weathering the storm” on trade by strengthening relations with other countries and exploiting the cracks in the U.S. strategy. Although it has ceded ground in North America for now, the “Asian dragon” remains very much present globally, adapting in order to remain the world’s factory in the new normal.
India: the next great factory or a new front of tension?
India has emerged in recent years as a natural candidate to benefit from the realignment of global manufacturing. In Washington, many see India as a strategic partner for a “friendshoring” policy —shifting supply chains toward friendly countries— in order to reduce dependence on China. In fact, in early 2025 there was talk of a possible U.S.–India trade agreement to encourage American companies to invest in India and thus create an alternative to the Chinese “giant.” India’s advantages include a huge, young population, low labor costs and cultural/linguistic affinity with the West. Multinational companies have already begun moving operations to India in sectors such as consumer electronics: Apple, for instance, accelerated iPhone manufacturing in India as part of its shift away from China. These trends suggest India could capture a larger share of global production in the coming years.
Even so, experts agree that India cannot replace China in the short term as “the world’s factory.” There are structural obstacles: inadequate infrastructure, bureaucracy, and weaker technical and industrial capabilities compared with China. “It is not possible in the short term, in terms of expertise and infrastructure, for India to replace China,” said one international markets analyst. India still faces challenges in scaling up its manufacturing in key areas such as textiles, automotive and electronics to the required level. At best, India could grow as part of a long-term plan, but there is no “shortcut” to replicating decades of Chinese industrial development. Fundamentally, the U.S. bet on India is not just economic but geopolitical: bringing India further into the American orbit avoids “handing it over” to a China–Russia alliance. Washington values the fact that India, despite its historically non-aligned stance, shares democratic principles and competes with China in Asia. Still, for now India works more as a complement than as a replacement for China in global chains.
Paradoxically, in 2025 India has also been drawn into trade friction with the U.S., which shows just how complex the board has become. The Trump administration, focused on punishing any rapprochement with adversaries, turned its attention to New Delhi when India continued buying Russian oil. In August, the U.S. imposed an additional 25% tariff on imports from India in retaliation for those crude purchases, raising total duties on Indian products to 50%. The move surprised and angered India: Narendra Modi’s government called the new U.S. tariffs “unfair and unreasonable” and immediately began exploring retaliatory action. In fact, for the first time India formally notified the WTO of possible retaliation against the U.S. —suspending equivalent tariff concessions— in response to the 25% tariffs Washington had kept in place on Indian steel and aluminum. This firmer stance from New Delhi contrasts with its earlier caution (recall that India had postponed retaliation during the first trade war). Now, in the face of Trump’s onslaught, India is taking a more assertive approach to defending its interests.
All in all, India finds itself in a dual position. On the one hand, it is seen as a potential winner from the global industrial reshuffle: large multinationals are announcing investments there, and the country is posting solid economic growth (~6% a year is forecast, above the global average). On the other hand, it is also feeling the fallout from the trade war, since it has not fully aligned with Western policy (its foreign policy autonomy regarding Russia has cost it trade sanctions). India is likely to keep attracting significant productive investment in sectors such as electronics, pharmaceuticals, automobiles and textiles as companies diversify their factories away from China. But it will equally have to negotiate carefully with the U.S. to avoid becoming the target of further punitive measures. In analysts’ words, India “will not be able to fill the Chinese void” in the short term, but it can emerge stronger from these trade wars if it manages to attract productive capital without isolating itself commercially. Its challenge will be to become a complementary manufacturing power, navigating between opportunity and geopolitical pressure.
Retail chains under pressure: shortages, costs and adaptation
Tariff turbulence has had a strong impact on retail chains, both in the United States and in Mexico. Retailers —from multinational giants to small shops— have had to cope with rising costs, the risk of stockouts and changes in their supplier base. In the United States, retail companies have spoken out about the direct consequences of high tariffs on China. In late April 2025, executives at the two largest retailers in the United States warned that the new tariffs (145% on Chinese products) could leave “empty shelves” in the following months. The alarm recalls the worst moments of the pandemic, but this time the cause is customs-related, not health-related. Since the massive tariff took effect, many U.S. companies have canceled orders with Chinese suppliers, freezing inventory flows. Port data confirm the drop: vessel traffic into the Port of Los Angeles in May was projected to be 33% lower than the previous year because of the collapse in Chinese imports. The National Retail Federation (NRF) calculates that, if the duties remain in place, total goods imports into the country would fall 20% in the second half of 2025, with a heavy impact on seasonal categories. Among the products at risk of shortage, retailers list:
• Footwear and apparel (from sneakers to basic clothing)
• Toys and school supplies (sensitive categories for back-to-school and Christmas)
• Low-cost electronics (affordable devices and accessories, mostly made in Asia)
• Imported perishable food products (certain juices or fish, for example)
For U.S. consumers, this points to less variety and higher prices on everyday items. In fact, faced with shrinking supply, the largest retailer in the United States announced it will be forced to raise prices across several departments. Margins at the big chains are being squeezed: one of the large retail chains reported significant pressure on its earnings from the combination of tariffs and lower store traffic. In other words, retailers are “paying a price” for the trade war too, not only in costs but in operational adjustments.
In response, the chains have accelerated supplier diversification and the relocation of their sourcing. U.S. retailers began looking for manufacturers in other countries (Vietnam, India, Mexico) or increasing domestic purchases back in 2019, but the 2025 escalation redoubled that urgency. Industry voices note that the largest companies in the U.S. retail industry will stick to their plans to move production away from China despite any temporary truce. Even with the 90-day tariff pause granted in May, many retailers stayed cautious: they used the window to pull forward duty-free imports (filling warehouses in the short term) but do not trust that a lasting solution is at hand, so they continue looking for alternative suppliers. In some extreme cases, small brands have chosen to suspend sales to the U.S. or absorb costs temporarily, fearing future volatility. In short, North American retail chains are restructuring their logistics chains in order to survive in an environment where relying on a single country (China) is simply too risky.
In Mexico, the impact on retailers has different angles. On the one hand, the government’s measures to favor nearshoring also include closing the loopholes through which cheap Asian products competing with local goods were entering. A flagship case is that of Asian online stores such as Shein and Temu, hugely popular for selling clothing and low-cost goods directly from China to Mexican consumers. As of January 1, 2025, Mexico imposed a general 19% tariff on all e-commerce parcels from countries without a trade agreement (such as China). In parallel, shipments from the U.S. and Canada sent by courier were set at 17% if they exceed US$50. In practice, these new rules eliminate the de minimis regime that previously allowed Asian platforms to flood the market without paying duties. In addition, in December 2024 a tariff increase of up to 35% was decreed on product categories such as clothing (dresses, shirts), home textiles (blankets, curtains) and even tents. The stated objective was to prevent undervaluation and unfair competition, ensuring a “level playing field” for Mexican companies and protecting local jobs. Authorities noted that many items were coming in evading taxes or at artificially low prices, harming domestic industry without genuinely making things much cheaper for the end consumer.
These measures certainly affect retailers and consumers in Mexico. Shein and Temu, giants of import e-commerce, are particularly vulnerable to the new tariffs. Their business model —very cheap products shipped directly from Asia to the customer— loses part of its appeal when each parcel carries a 19% duty. That could translate into higher prices or a narrower assortment on those platforms, and possibly a decline in their market share in favor of local stores or established chains. In effect, the playing field is being leveled somewhat for traditional retailers (including the Mexican subsidiaries of the two most emblematic global retailers, among others), which did pay full duties when importing merchandise. In the short term, Mexican consumers may notice that certain imported “bargains” are no longer such a bargain. The government’s intention, however, is for that demand to shift toward products made in Mexico or in T-MEC partner countries, reinforcing the regional chain. It remains to be seen whether domestic production can quickly fill the gaps left by more expensive imports —otherwise, inflationary pressure could appear in categories such as clothing and footwear.
One side effect worth watching is the interaction with Mexico’s IMMEX program (maquiladora industry). Some experts have warned that the new Mexican tariffs, if not applied carefully, could disrupt schemes in which foreign companies import inputs duty-free to assemble in Mexico and re-export. In other words, measures designed to curb finished consumer goods (Chinese clothing sold at retail, for example) could end up hitting manufacturers that import components to produce in Mexico (fabrics for garment making here, for instance). So far, the authorities have indicated that their target is abusive practices and evasion, not export manufacturing. It is nonetheless a delicate balance: protecting local industry without scaring off foreign manufacturing investment.
In summary, retail chains in Mexico and the U.S. are adapting under intense pressure. In both countries, retailers face the challenge of keeping their stores stocked without passing the full tariff hit on to consumers. In the U.S., that means diversifying suppliers, rethinking prices and possibly accepting thinner margins in order not to lose customers. In Mexico, it means adjusting assortments and seeking domestic or regional sourcing to fill the space once occupied by cheap imports. If the trade war has made one thing clear so far, it is that retail —the link closest to the end consumer— is an immediate thermometer of its effects: from shelves that are empty or full, to the price we pay for clothing, toys or daily groceries. Stores are on the front line of this global trade battle, reinventing their strategies to keep operating in a world of high tariffs and commercial uncertainty.
A new manufacturing order under construction
As of late summer 2025, the global trade picture is far from normalized. The tariff “pause” between the U.S. and China is coming to an end and there is still no definitive agreement, which points to possible re-escalation in the short term. The trade war has lasted long enough to reconfigure international supply chains, but not long enough to resolve the underlying tensions. In this landscape, Mexico continues to bet heavily on nearshoring, trying to establish itself as the big winner of the rivalry between superpowers. It has made notable progress —more investment, a larger share of the U.S. market— but faces the challenge of maintaining business confidence amid political swings. Its factories could be pillars of a new, integrated North American manufacturing base, provided the North American trade environment regains stability and T-MEC rules are honored without surprises.
Meanwhile, Asian factories are not defeated, but evolving. China and other countries in the region have shown an ability to adapt: relocating plants, seeking alternative markets and negotiating where possible. China retains its global industrial weight, albeit with a role adjusted to the new multipolar reality of “friendshoring” and partial “decoupling.” India is shaping up as a key piece of the future puzzle, aspiring to a larger role in global manufacturing, but it will have to overcome domestic obstacles and navigate its relationship with Washington. And retailers —the final links in the chain— will keep pressing for certainty and reasonable costs, since both their businesses and the wallets of millions of consumers depend on it.
The big open question is whether we are heading toward a system of more regionalized trade blocs (North America, Europe, Asia), or whether there is room to rebuild the global rules of trade. For now, the tariff “war” has given way to a kind of new commercial Cold War, in which economic security is intertwined with geopolitical considerations. Mexico, in particular, is walking a fine line: it seeks to seize the moment to develop industrially, without getting caught in the struggles between the major powers. The coming months will be crucial. One thing is certain: based on what we know today, the impacts of this trade war continue to evolve and to shape a new manufacturing order whose ultimate winners and losers are still to be determined.