Localized Nearshoring? Impacts of the US-China Trade War on Mexican Municipalities

Emmanuel Jose Vázquez, Carlos Rodríguez-Castelán and Hernan Winkler

No 4843, Asociación Argentina de Economía Política: Working Papers from Asociación Argentina de Economía Política

Abstract: This article investigates the local impacts of the 2018-2019 US-China trade war across Mexican municipalities. Using detailed customs data on exports at the municipal level and US tariff data, we find that municipalities with exports more concentrated in products targeted by US tariffs on Chinese goods experienced significantly larger increases in exports to the US. A 1 percent increase in exposure to US tariffs on China led to a 4.3 percent increase in municipality-level exports to the US. These export gains were accompanied by improved labor market outcomes, including a 5.6 percent increase in total labor income and a 0.25 percentage-point reduction in labor informality. Effects were heterogeneous across skill levels, with only semi-skilled workers experiencing employment gains. These effects were mainly concentrated in the manufacturing sector, with some positive spillovers to services but none to agriculture. The findings show that changes in trade policies between major economies can influence the geographic distribution of economic activity and labor market outcomes within bystander countries.

JEL-codes: F14 R23 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2025-12
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Persistent link: https://EconPapers.repec.org/RePEc:aep:anales:4843

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