With the return of Donald Trump to the United States presidency and the imposition of his aggressive tariff policy, the dominant scenario among analysts and investors was that the world’s largest economy would trigger a significant contraction in international trade. However, an analysis by BBVA Research proposes a different conclusion: global trade did not disappear or contract; it simply changed its origin.
The trade war between the United States and China is accelerating a transformation that was already underway since the pandemic: the search for more diversified supply chains that are less dependent on a single country and closer to the US market.
According to the BBVA Research study “What Impact Have Trump’s Tariffs Had on Imports?”, it is concluded that the new levies did have a direct effect on trade flows: for every one-percentage-point increase in tariffs applied to a country, US imports from that economy decreased by around 2%.
But the most relevant data point for markets and companies is that this drop did not necessarily mean a reduction in total trade. The United States simply began to substitute suppliers. The result is a redistribution of market share within global value chains.
“Tariffs are modifying trade patterns rather than reducing trade,” is the central conclusion drawn from the BBVA Research analysis. The question now for investors and companies is not only how much trade is lost due to trade barriers, but who occupies the space left behind by the affected suppliers.
China Loses Ground and Mexico Gains Share
The main shift is observed in the trade relationship between the United States and China. For decades, China was the primary manufacturing supplier for the US market. However, the combination of geopolitical tensions, technological restrictions, and new tariffs has forced US companies to look for alternatives.
In this scenario, Mexico emerges as one of the main beneficiaries of this process. The country was already the primary trading partner of the United States prior to this new phase of trade tensions. In 2023, it surpassed China as the main source of US imports, and in 2024, it consolidated that position.
Data from the U.S. Census Bureau show that bilateral trade between Mexico and the United States reached record levels last year, with an exchange exceeding 800 billion dollars annually, driven mainly by manufacturing sectors such as automotive, machinery, electronics, and industrial equipment.
The phenomenon responds to several structural advantages: geographic proximity to the United States; productive integration under the United States-Mexico-Canada Agreement (USMCA); competitive labor costs; a broad network of industrial suppliers; and installed capacity in advanced manufacturing, among others.
For BBVA Research, Mexico is not only capturing trade displaced from China, but is also acquiring a more strategic role within regional supply chains. So-called nearshoring has stopped being just an expectation of future investment and has begun to be reflected in trade patterns.
Latin America Seeks to Capitalize on the New Reconfiguration
The shift in global chains is not limited to Mexico. The trade fragmentation between the United States and China opens up opportunities for various Latin American economies, though with differing capacities to capture investment.
Mexico is the most obvious case due to its integration with the United States, but other countries can benefit in specific niches. For example:
Costa Rica: This country has developed a prominent position in medical and electronic manufacturing.
Dominican Republic: It has strengthened its export-oriented free trade zone sectors.
Brazil: It can take advantage of opportunities linked to manufacturing, energy, and strategic raw materials.
Chile and Peru: Countries that hold a relevant position in critical minerals needed for the energy transition and advanced technologies, such as copper and lithium.
However, BBVA Research has pointed out in various analyses on investment and nearshoring that the opportunity is not guaranteed, because the region needs to resolve historical obstacles such as insufficient logistical infrastructure, regulatory uncertainty, low regional integration, a deficit of specialized talent, and energy costs.
Additionally, the competition is no longer solely among emerging countries in the region, as Mexico competes against Vietnam, India, Malaysia, and other Asian economies that are also looking to capture the manufacturing shifting out of China.
AI Opens a New Window for Mexico and Asia
One of the most relevant elements of the BBVA Research analysis is that the commercial reorganization is not driven exclusively by tariffs. There is another structural factor: the new technological economy driven by artificial intelligence.
The explosion in global demand for AI-related infrastructure—such as semiconductors, servers, electronic components, and specialized equipment—is once again modifying trade flows. BBVA identifies that in some products linked to this new economy, the United States is reducing purchases from China and increasing acquisitions from economies like Taiwan and Mexico.
The reason is that technology companies are seeking suppliers considered more reliable from a geopolitical and logistical perspective. Mexico has a particularly relevant opportunity in sectors such as electronics manufacturing, advanced automotive components, data centers, electrical equipment, as well as semiconductors and specialized assembly.
Although Mexico does not yet compete directly with Taiwan in advanced chip production, it can capture important stages of the technology chain, especially manufacturing, integration, and logistics. For investors, this trend offers a different interpretation: nearshoring is no longer just about relocating traditional factories, but about building industrial ecosystems around strategic sectors.
Tariffs Are Unlikely to Resolve the US Trade Deficit
Despite the fact that US tariff policy seeks to reduce foreign dependence and decrease the trade deficit, BBVA Research warns that the outcome may be limited. The reason is that countries do not disappear as suppliers; they simply change.
The logic is compelling: if the United States reduces imports from China but increases purchases from Mexico, Vietnam, or other economies, the trade deficit may alter its geographic composition, but it will not necessarily disappear.
Furthermore, tariffs can generate secondary effects such as higher costs for US companies, pressure on consumer prices, lower efficiency in production chains, and potential trade retaliation—several of these effects are, in fact, already a reality today. That is why the final impact will depend on how much companies can absorb the higher costs and how quickly they manage to reorganize their supply chains.
The key point of the BBVA Research analysis lies in the fact that the global economy is not entering a phase of less trade, but rather a phase of more fragmented and strategic trade. In other words: globalization is not disappearing; it is just changing shape.
During recent decades, companies primarily sought efficiency and lower costs. Now, they also seek security, resilience, and lower geopolitical exposure. In this new scenario, Mexico and certain Latin American countries, to a lesser extent, start with a relevant advantage.
The combination of their location, the USMCA in the specific case of Mexico, their manufacturing base, and proximity to the world’s largest consumer market places them among the best-positioned countries to capture a portion of the new trade map. The true winner of the tariff war will not necessarily be the one who imposes the most barriers, but the one who manages to become the alternative supplier when companies decide to reroute.
