One silver lining – or at least an opportunity – from the supply chain, price and geopolitical uncertainty that the world has faced post-pandemic is the welcome phenomenon of nearshoring to North America. The U.S. actually bought more from Mexico than from China in 2023! Now, much of that economic activity comes from the automotive sector, as more than a dozen car and truck manufacturers have invested heavily in Mexico, and many foreign brands have American and Canadian plants. Still, we’re doing business far more locally – vehicles aren’t the only products crossing North American borders.
What does this mean for U.S. small businesses? On the supply side, quality goods shipped from a much shorter distance can limit the detrimental effect on cash flow that can come from excessive inventory. Many businesses have been forced to move from just-in-time to just-in-case, lest they run out of needed stock. North American suppliers mean shorter and faster supply lines and, at a minimum, provide an additional source of stock or materials.
Travel to meet with customers and suppliers to Mexico and Canada is easier and less expensive than travel to the EU or Asia. Even for Zoom or Teams video call, time differences are far less obstructive. We also share similarities in culture and language.
Both Mexico and Canada offer access to skilled and educated workforces, particularly in sectors like manufacturing, technology, and customer service. For U.S. business facing a labor crisis due in part to massive Baby Boomer retirements, talented workers are relatively close at hand.
In terms of customers, Mexico is projected to be the fifth-largest economy in the world by 2050 (source: Investopedia) and thus their middle class is rising dramatically in terms of purchasing power. Not tapping that market would be like ignoring California, which if it were a separate country would itself be the fifth largest in the world at present. Canada’s 39 million people are enjoying employment levels that are 1.1 million jobs above pre-pandemic levels and Canada is projected to see the strongest economic growth in the G7 next year (source: Department of Finance Canada).
Canada and Mexico are the top two trading partners for the U.S., and that holds true for Kansas, as well. For Mexico, the biggest Kansas exports are agricultural products, processed foods, chemicals, transportation equipment (largely planes) and machinery. Canada is very similar, but transportation equipment leads the pack, and they add computer and electronic products. (source: International Trade Administration)
In terms of suppliers of parts, raw machinery or manufacturing, or in terms of customers for U.S. goods and services, U.S. business often need not look any further than our North American neighbors.
