Elsewhere in North America: How U.S. Tariffs on China Boosted Mexico's Manufacturing Employment and Output

Using longitudinal firm- and plant-level data from Mexico linked to customs records over 2014–2023, I examine whether US tariffs targeting China stimulated manufacturing expansion in Mexico. Leveraging the abrupt shift in US trade policy as a natural experiment, and constructing firm-level trade policy exposure measures based on firms' pre-shock trade portfolios, I show that higher US tariffs on China significantly increased manufacturing output, value added, and employment. Foreign multinationals and their domestic affiliates operating under Mexico's export platform, IMMEX, drive these gains, with U.S.-headquartered firms making a particularly notable contribution. Adjustment occurs along both intensive and extensive margins, through expansion of existing plants and establishment of new ones. Employment gains are concentrated in technology-intensive industries and among production workers and technicians—precisely the middle-skill manufacturing jobs that trade protectionism sought to restore domestically. These findings show that heightened import protection stimulated manufacturing activity elsewhere in North America, driven by multinationals, including U.S.-headquartered firms, highlighting how the realized outcomes of trade policy can diverge from their intended effects in an integrated global economy.