Leonardo Coutinho
The United States’ nearshoring strategy is no longer merely an aspiration. It is beginning to show measurable results in the structure of U.S. trade.
The shift is not uniform across the hemisphere, nor does it prove that every increase in trade is the product of industrial relocation. But the direction is increasingly clear: U.S. commerce is moving closer to home, and Latin America and the Caribbean are becoming more central to American supply-chain resilience, industrial security, and strategic competition with China.
Data from the Bureau of Economic Analysis (BEA), measuring U.S. exports and imports of goods and services, show a striking post-2020 reordering.
Total U.S. trade with Latin America and the Caribbean rose from roughly $983 billion in 2020 to nearly $1.7 trillion in 2025. Over the same period, U.S. trade with China declined from about $615 billion to $496 billion.
In the first quarter of 2026, the trend remained visible: U.S. trade with Latin America and the Caribbean reached approximately $450 billion, compared with about $116 billion with China.
The United States cannot simply order nearshoring into existence. As an open economy, it does not command private firms to relocate factories, rewrite supplier contracts, or abandon efficient offshore production overnight. Nearshoring happens through a different mechanism: the convergence of market signals, geopolitical risk, regulatory incentives, trade rules, and corporate risk management.
Washington cannot force every supply chain to move closer to home, but it can change the strategic environment in which companies calculate cost, resilience, compliance, and access to the U.S. market.
This is why nearshoring should be understood less as a government mandate and more as a policy-shaped market response. The White House has framed supply-chain resilience as a security problem requiring public-private tools, while business surveys show that companies now rank logistics, lead times, labor, rule of law, and security as decisive factors in sourcing and investment decisions.
This does not mean that China has disappeared from U.S. supply chains. It has not. Nor does it mean that the United States has fully solved its dependence on strategic competitors.
But it does indicate that the Western Hemisphere is absorbing a growing share of the commercial weight once concentrated in transpacific supply chains.
That is the real significance of nearshoring: not a sudden rupture with China, but a gradual relocation of strategic relevance toward countries that are closer, friendlier, and more compatible with U.S. economic and security interests.
From the SFS perspective, nearshoring should be understood as part of a broader strategic competition over the industrial geography of the 21st century. Supply chains are no longer neutral commercial networks. They are instruments of national power, economic coercion, defense readiness, technological sovereignty, and geopolitical alignment.
The country that controls production nodes, logistics corridors, ports, digital infrastructure, energy inputs, and critical minerals controls far more than trade flows. It controls the resilience of states in moments of crisis.
THAT IS WHY THE SHIFT TOWARD LATIN AMERICA MATTERS
A factory in northern Mexico, a medical-device cluster in Costa Rica, a free-zone platform in the Dominican Republic, an energy corridor in Guyana, a lithium project in Argentina, or a copper supply chain in Chile are not isolated economic assets.
They are pieces of a hemispheric security architecture. Properly integrated, they reduce U.S. exposure to China-centered supply chains, shorten logistics routes, create trusted production capacity, and strengthen the Western Hemisphere’s ability to absorb shocks from war, pandemics, coercive trade practices, or maritime disruption.
Mexico is the central pillar of this transformation. From 2020 to 2025, U.S. trade in goods and services with Mexico increased by roughly $389 billion, accounting for more than half of the total increase in U.S. trade with Latin America and the Caribbean during that period.
This is the clearest statistical evidence that nearshoring is already producing structural effects. Mexico’s advantage is not simply geographical. It is the combination of proximity, the United States-Mexico-Canada Agreement (USMCA) rules, dense industrial integration, cross-border logistics, energy access, labor depth, and decades of manufacturing specialization in sectors such as autos, electronics, machinery, medical devices, and intermediate goods.
The U.S.-Mexico relationship has become more than a bilateral trade channel. It is now a strategic production platform. Goods no longer merely cross the border as finished products; they move through integrated value chains in which components, design, assembly, logistics, and services are distributed across North America.
For Washington, this matters because supply chains are now national-security infrastructure. For Mexico, it represents the strongest development opportunity in a generation.
Central America also has a significant role, particularly through the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) framework and the broader co-production corridor linking the United States, Mexico, the Dominican Republic, and Central American economies.
The numbers are smaller than Mexico’s, but the strategic importance is disproportionate. Central America offers proximity to U.S. ports, established apparel and textile networks, expanding free-zone capacity, and potential in light manufacturing, medical devices, agro-industry, logistics, and business services.
This is where nearshoring becomes more than an economic trend. It becomes an instrument of regional stabilization. A stronger manufacturing and services base in Central America can create formal employment, reduce incentives for irregular migration, deepen lawful commerce, and expand the region’s stake in a secure U.S.-led economic architecture.
The United States has spent decades treating Central America mainly as a problem set defined by migration, corruption, crime, and development fragility. Nearshoring offers a different framework: Central America as part of the solution to supply-chain resilience, hemispheric competitiveness, and strategic competition with China.
Costa Rica illustrates the higher-value version of this opportunity. Its medical-device sector and emerging semiconductor ambitions show that small countries can become strategic nodes if they combine institutional stability, skilled labor, free-zone competitiveness, trusted regulatory frameworks, and alignment with U.S. supply-chain priorities.
This model will not be identical across the region, but it demonstrates that Central America does not need to compete only on low wages. It can compete on reliability, speed, regulatory predictability, and specialized niches.
The broader lesson for South America is urgent. The post-2020 data show that Latin America is gaining weight in U.S. trade, but not all countries are capturing the same kind of value. South America has benefited from higher commerce in commodities, energy, food, minerals, and services. These sectors matter. Critical minerals, copper, lithium, oil, gas, agricultural inputs, and food security are all central to the geopolitical economy of the next decade. But exporting raw materials is not the same as integrating into strategic supply chains.
South America now faces a choice. It can remain a supplier of commodities to competing global powers, or it can become an industrial, logistical, and technological partner in the rebuilding of trusted Western Hemisphere supply chains. The difference will depend on policy choices made now: infrastructure, ports, energy reliability, customs modernization, investment protection, tax stability, anti-corruption enforcement, workforce training, digital regulation, security cooperation, and credible screening of strategic foreign investment.
THE WARNING IS STRAIGHTFORWARD
If South American governments fail to move quickly, nearshoring will not wait for them.
Mexico will continue to consolidate its advantage. Central America and the Dominican Republic will capture selected labor-intensive and mid-value opportunities. Asian partners outside China will absorb much of the remaining diversification. Meanwhile, South America risks being left with the old model: exporting commodities, importing finished goods, and allowing external powers to dominate ports, logistics corridors, energy grids, telecommunications, and critical-mineral processing.
That outcome would be strategically costly. The United States cannot build resilient supply chains if the region’s infrastructure is shaped by adversarial capital, opaque contracts, dual-use logistics, and political dependency. Latin American governments cannot claim sovereignty while allowing strategic sectors to be financed, built, operated, or digitally integrated by actors whose long-term interests diverge from democratic transparency and regional autonomy.
This is especially relevant in ports, logistics corridors, energy systems, data infrastructure, and critical minerals. These sectors sit at the intersection of commerce and defense.
A port is not just a port if it can shape cargo flows, military mobility, customs visibility, sanctions evasion, illicit trade, or dual-use access. A telecommunications network is not just a business service if it carries sensitive government, financial, commercial, and security data. A mining project is not merely an extractive venture if the mineral it produces is essential to batteries, defense systems, semiconductors, or energy storage.
Nearshoring therefore must be understood as a hemispheric security agenda, not simply a trade agenda. The United States should treat Mexico and Central America as the first ring of supply-chain relocation, but it should also build a second ring with South America around critical minerals, energy, food systems, pharmaceuticals, aerospace components, defense-adjacent manufacturing, data infrastructure, and trusted logistics.
This will require more than speeches about partnership. It will require financing tools, procurement incentives, infrastructure coordination, regulatory harmonization, and a strategic willingness to compete with China where Beijing has already built influence.
FOR LATIN AMERICA, THE OPPORTUNITY IS EQUALLY CLEAR
Countries that align with trusted supply chains can attract investment, create formal employment, upgrade industrial capabilities, and gain geopolitical leverage. Countries that delay will remain vulnerable to commodity cycles, predatory infrastructure finance, criminal penetration of logistics, and external strategic dependency.
The strategic question is not whether Latin America can replace China overnight. It cannot. The real question is whether the United States and its regional partners can build enough trusted capacity in the hemisphere to deny Beijing excessive leverage over critical sectors. In that sense, nearshoring is not an anti-China slogan. It is a doctrine of resilience and sovereignty.
The nearshoring window is open, but it will not remain open indefinitely. Mexico has already shown that geography, trade rules, and industrial depth can translate into measurable gains. Central America is positioned to become a complementary platform if it strengthens security, infrastructure, and institutional reliability. South America still has time to convert its natural resources and market scale into strategic industrial relevance.
The next phase of great-power competition will not be decided only by aircraft carriers and missiles. It will also be decided by who controls the factories, ports, minerals, data cables, energy corridors, logistics platforms, and industrial ecosystems behind them.
For the United States, Latin America is no longer merely a neighboring market. It is the strategic backdoor of American industrial power. The next question is whether the region is prepared to turn this trade shift into a durable architecture of prosperity, sovereignty, and security.
