Tariffs, Rules of Origin, and the Reorganization of North American Supply Chains (Job Market Paper)

This paper quantifies how tariffs and rules of origin drive the reorganization of North American supply chains around Mexico, and what that reorganization implies for welfare. Between 2018 and 2025 three shocks reshaped this landscape: the U.S.-China trade war, the 2020 NAFTA-to-USMCA transition, and a 2025 U.S. executive order sharply raising tariffs on Mexican imports outside USMCA preference. I develop a global sourcing model in which heterogeneous firms choose source countries and, product by product, whether to export under USMCA, thus having to comply with rules of origin, and calibrate it on matched census-customs microdata. Through the lens of the model, the transition to USMCA was roughly welfare-neutral for Mexico, while the shift in relative sourcing efficiency across countries raised welfare. The higher tariffs on non-compliant goods imposed under the second Trump administration, along with a Mexican tariff on source countries outside its free-trade network, both lower welfare by raising the effective cost of choosing not to comply with USMCA.

Foreign Firm Footprints: Entry, Agglomeration and Welfare in Mexico

Foreign firms account for less than 1% of Mexican manufacturing establishments but 40% of employment and 60% of exports, and they agglomerate with same-origin firms into distinct regional corridors. Using data from seven waves of the Economic Census (1994-2024), this paper develops and estimates a quantitative spatial model of foreign and domestic firm location in which origin- and industry-specific agglomeration produce this geographic dispersion. I use the results to conduct counterfactual exercises evaluating how U.S. tariff impositions would affect firm location decisions, input markets, and welfare across Mexican commuting zones. Under a 25% tariff on Mexican exports, the income-weighted average commuting zone loses 0.051 log points of real income, and the losses are largest where foreign firms are most present.

Labor Market Power and Informality

with Octavio Vera

This paper documents differences in wage markdowns in both the formal and informal sectors of the Mexican economy and proposes a theory linking labor market power to the structure of formal employment costs. The core insight is that firms with monopsony power can pass the implicit tax of formal hiring, including social security contributions and firing costs, onto workers through lower wages, generating higher observed markdowns among more formal firms.