Driven by nearshoring and tariff exemptions, Chihuahua's computer and electronics sector has surged past automotive trade to become a primary pillar of US-Mexico economic integration amid ongoing USMCA negotiations.
As the first joint review for the US-Mexico-Canada Agreement (USMCA) moves forward following bilateral negotiations between the US and Mexico in Mexico City during the week of July 20, 2026, it is worth examining the relevance of this trade relationship and the Mexican state of Chihuahua as a nearshoring location.
Nearshoring, which refers to companies moving production closer to the markets they serve, has been a prevalent strategy for North American economic integration over the last two decades. Chihuahua, a Mexican border state with Texas and New Mexico, has seen significant growth in industrial activity in the cities of Ju谩rez and Chihuahua since the beginning of NAFTA in 1994.
Figure 1 presents US imports from Mexico expressed in USD billions between 2017 and 2025 for the two largest sectors: computers and autos (including passenger vehicles). We observe in Figure 1 that in 2025, US imports of computer equipment from Mexico surpassed passenger vehicles for the first time. In recent years, Mexico has become a major US supplier of computers, including automatic data processing machines. The value of computer equipment exported from Mexico to the US since 2017 has grown by 349-percent, which shows stark growth compared to the auto sector, with 48-percent.
Figure 2 presents Chihuahua鈥檚 exports expressed in USD billions between 2019 and 2025, where the most important export sectors are transportation and computer and electronic equipment. Interestingly, in Figure 2 we observe an increase of 45-percent in the value of Chihuahua's total exports between 2024 and 2025 where the computer and electronic equipment sector grew by 93-percent, whereas transportation equipment decreased by 4-percent.
Computers and electronics products are clear examples of the intra-industry trade created by the joint nearshoring production strategy established under the USMCA between the US and Mexico. While Figure 1 shows computers鈥 rise among US imports from Mexico, the sector-level data reveals the two-way nature of this trade. are simultaneously the second largest US import from Mexico and the largest US export sector to Mexico, representing 21-percent of US exports to Mexico. The growth of this sector, as shown in Figure 2 for Chihuahua, coincides with the advantage given to USMCA compliance of Mexican exports with the steep tariffs imposed by the Trump administration in 2025. In Chihuahua, the computer and electronics sector moved from representing 45-percent of total exports in 2024 to 60-percent in 2025.
The computer and electronics industries have gone through a significant transition over time. Back in the early 2000s, when China joined the WTO, this sector had to transform in the state of Chihuahua to retain its competitiveness. There was a shift from of high-end flatscreen TVs, metal mechanics, and medical instruments and supplies. Today, we are also observing a transition towards the production of semiconductors, integrated circuits, CPUs, and networking equipment. Industrial clusters for the production of computer and electronic equipment have solidified in the cities of Ju谩rez and Chihuahua in the last decade.
The is probably the sector with the longest history under the NAFTA and USMCA. The auto trade relationship goes back to the 1965 US-Canada Auto Pact, with Mexico joining this trade partnership with NAFTA. Currently, with the USMCA, there is an for passenger vehicles and light trucks of 75-percent (originally 62.5-percent under NAFTA). There is also a requirement for 70-percent of to originate in North America. As far as labor content, the USMCA established a requirement, which was not in place with NAFTA, of 40 to 45-percent of a vehicle鈥檚 value to be produced by workers earning on average at least . As noted by the Congressional Research Service, these are the strictest automotive ROO in any US trade agreement. As of 2025, similar to the computer sector, there is a nature, where transportation equipment represents 13-percent of US exports to Mexico (second largest sector) and 30-percent of US imports from Mexico (first largest sector).
Under the current trade negotiations, this sector has been of extreme importance. The has expressed interest in revising the ROO to benefit US manufacturers by raising US content. In fact, the USITC, in its congressionally mandated biennial assessment, estimated the on the US economy, the US automotive industry, and other related industries. They found that the stricter ROO in this sector led to modest increases in US parts and steel production while slightly reducing US vehicle output, with effects on US GDP and aggregate employment of less than 0.01percent. This report also finds, from a producers鈥 survey, that most sourcing changes made to meet the ROO requirements increased production cost. In relation to investment, they found that the US was the recipient of 80-percent of vehicle manufacturing investment in the USMCA region between 2019 and 2023, and most of this investment was tied to the industry鈥檚 electrification transition. The auto sector has been on the agenda in the last three bilateral US-Mexico rounds of negotiations. Still, there has not been any official agreement on how the ROO will be modified for this sector.
At the agreement鈥檚 first joint review on July 1, 2026, the US did not agree to renew the USMCA in its current form, but the , with joint reviews to follow until the partners agree to renew or the agreement expires in 2036. During the week of July 20, 2026, representatives from the US and Mexico met in Mexico City for a third round of negotiations concluding July 23. In a joint statement for the third round of negotiations, noted the relevance of this bilateral trade relationship and the need for continuing a strategic partnership to ensure the competitiveness of the manufacturing sector and strengthen supply chains in the North American region. The major issues discussed in these negotiations, and that are likely to be discussed in the fourth round of bilateral negotiations scheduled for Washington, D.C. in September 2026, are economic security, labor, agriculture, electronic payment services, steel and aluminum, and automobiles.
Given the nature of the bilateral relationship between the US and Mexico, moving forward with a USMCA review process that provides a framework with clear and stable rules should be a key priority for trade policy. There is evidence of a two-way trade between these countries in key sectors such as transportation and computer equipment, which warrants special attention to ensure that any changes to the rules continue to promote this symbiotic trade relationship. There is also another strategic industry integrated through this trade relationship, the aerospace sector. The aerospace industry trades under the USMCA鈥檚 general rules of origin, with none of the elevated content or labor value requirements seen in the auto industry. This industry has also been developed through in the state of Chihuahua.
A successful USMCA joint review process would align with the US national security strategy goals for the Western Hemisphere of 鈥.鈥 The strengthening of the USMCA partnership presents an opportunity for 鈥渆xpanding鈥 US collaboration with Mexico to foster economic development and prosperity in the hemisphere, which is relevant in the current environment where there has been an increasing outside economic influence. Maintaining stable and predictable trade rules between the US and Mexico is a pragmatic approach to work towards achieving the goals of the US national security strategy.
The author thanks Isabella Elias, MPP candidate at Pepperdine School of Public Policy, for research assistance.
