Relocation implications in China and North America: Measuring spillover and feedback effects by potential changes on interregional trade in the electronics industry

Abstract

The research examines the implications of relocating foreign direct investment (FDI) in the electronics industry from China to North America. The study focuses on nearshoring to Mexico and backshoring to the United States in the context of increasing trade tensions. Using Input-Output Analysis, it quantifies spillover and feedback effects on regional economies by simulating two policy scenarios. The findings indicate that nearshoring to Mexico generates higher economic benefits compared to backshoring, as Mexico captures significant spillover effects due to its established manufacturing base and integration with U.S. industries. By contrast, backshoring yields lower economic gains due to the weakened state of the U.S. electronics sector, which remains dependent on Asian supply chains. The study concludes that nearshoring offers a more viable strategy for regional integration and competitiveness in North America, emphasizing the need for policies that strengthen Mexico’s role in electronics manufacturing through innovation and technological upgrading. This approach could enhance the region's autonomy and resilience in the face of global supply chain disruptions.