North American Supply Chains Are More Integrated Than Most People Realize
When an automobile rolls off an assembly line in Michigan or Kentucky, it may carry thousands of components sourced from dozens of U.S. states and multiple Mexican locations. The final assembly badge — “Made in USA” or “Made in Mexico” — says almost nothing about the actual geography of production. This is the reality that the NAFTA era built, and that USMCA inherited.
A significant portion of U.S.-Mexico merchandise trade is not conventional import-export commerce. It is production sharing — the coordinated movement of intermediate inputs across the border as part of integrated manufacturing workflows. U.S. manufacturers export components to Mexican facilities, which process or assemble them into finished products that re-enter the United States as imports. The flow runs in both directions, and the border functions less as a boundary than as a seam.
The auto industry is the clearest example. Multilayered supplier relationships link U.S. and Mexican assembly points in ways that have no clean national origin. Motor vehicle parts accounted for $24.8 billion in U.S. exports to Mexico and $67.3 billion in U.S. imports from Mexico in 2025 — and motor vehicles themselves added another $84.4 billion on the import side. Electronics manufacturing follows a similar pattern, with semiconductors and computer equipment moving in both directions as part of integrated production.
This integration was a deliberate policy outcome. NAFTA’s architects argued that shared supply chains would strengthen North American competitiveness against producers in Asia and Europe by allowing each economy to specialize in what it does best. Three decades later, that logic is both validated and contested. The supply chains exist and function; the question of who captures the most value — and how trade deficits should be interpreted in this context — remains politically unresolved.
USMCA’s tighter rules of origin for motor vehicles were intended to increase the North American content requirement, nudging more production back toward the continent. How that plays out against the current tariff environment, with Section 232 duties on autos and auto parts layered on top of USMCA preferences, is one of the more complex industrial policy puzzles now facing both governments.