Nice Economy – If You Can Keep It 

San Diego’s economy is the size of some small countries. But it’s a country under threat. 

On paper, San Diego County is a picture of prosperity. If the county were its own nation, its $315 billion gross domestic product would rank among the world’s 50 largest economies. 

Yet, across the region, businesses are putting on the brakes and worried about the future. 

The reason? New federal trade and immigration policies threaten to choke off what once seemed like San Diego’s unique competitive advantage: Its intertwined economic relationship with its southern neighbor, Mexico. 

This story is part of our Big Questions Facing San Diego in the Next 20 Years reporting project. Stay tuned for more stories this week.

Pillars of the local economy, including biotech companies, medical device manufacturers, the port, auto dealers and warehouse and shipping companies, all depend on the $80 billion worth of goods that pass back and forth across the San Diego region’s border with Mexico each year, said Alan Gin, a University of San Diego economist who studies the cross-border economy. 

Just as crucially, many companies, including some of the region’s most advanced research and design hubs, could not function without easy access to the high-tech manufacturing centers across the border in Tijuana. 

And many San Diego businesses rely on the roughly 60,000 workers – some of them American citizens – who live in Mexico but cross the border each day to work or attend school in the United States. 

The symbiotic relationship between San Diego and its southern neighbor has produced what Gin and other researchers describe as a sprawling economic “mega-region” whose seven million residents together produce $350 billion in economic output per year. 

It’s a mega-region at a sudden and unexpected crossroads.  

President Donald Trump’s America-first immigration crackdowns and punishingly high tariffs strike at the heart of San Diego’s unique economic relationship with Mexico. 

As border crossings slow and shipping costs rise, business leaders increasingly wonder whether San Diego can maintain its binational advantage in an era of economic nationalism. 

Looking ahead to San Diego’s next two decades, regional leaders will have to decide whether to wait and hope the current America-first trend fades – or begin restructuring local businesses and schools to forge a new economy that preserves what it can of its binational ties while bringing back to the United States much of the work currently outsourced to Mexico. 

Federal policy “puts a target on the San Diego economy’s back,” said Gin “There would be some severe damage if that trade relationship [with Mexico] was compromised…[The current factory system] has built up over years in Mexico and it would take a long time to replicate that in San Diego…We’re doing things we haven’t done before.” 

A single tiny component illustrates just how dependent on Mexico the San Diego economy is. 

Five years ago, when then-President Trump closed the U.S.-Mexico border to stop the spread of Covid-19, medical device manufacturers immediately alerted U.S. authorities to a problem, said Kenia Zamarripa, vice president of international and public affairs for the San Diego Chamber of Commerce. 

“A bunch of businesses shut down, and we learned [there’s] this little metal piece [made] in Tijuana that’s a key component in respirators or defibrillators,” Zamarripa said. 

“We had to bring together business organizations and discuss this…We re-opened 80 percent of these [cross-border] businesses within a week. We said [to federal authorities], we need you to open these businesses. We need these businesses to continue operating.” 

Zamarripa cited another, more readily visible, example of the mega-region’s intertwined economy. 

“People can see [Toyota] Tacomas on the freeway,” she said. “That product crossed the border five or six times [during assembly]. Assembly lines on the Mexico side [build the car] and San Diego adds the software telling the car what to do. Then it goes back to the assembly line and eventually we have a full Tacoma.” 

Zamarripa said companies send products back and forth across the border like that because even highly skilled workers in Mexico earn a fraction of what their American counterparts are paid. And, unlike in Mexico, she said, San Diego’s educational system simply is not designed to train workers for high-tech factory jobs. 

“Automobiles and medical devices are [just] two [of the] things we assemble together,” Zamarripa said. “A lot of people don’t understand that.” 

Business leaders do. And they are not happy with the current federal threat to the economic system they have spent decades putting together. 

“A lot of companies are in a holding pattern,” said Jim O’Callaghan, president and CEO of the South County Economic Development Council, which advises and supports businesses in San Diego County’s border-adjacent southern half. “It’s difficult to plan when you don’t know what you’re doing.” 

This week, San Diego recorded the nation’s highest rate of inflation – 4 percent, compared to 2.7 percent in the United States as a whole. 

Gin said labor shortages caused in part by an immigration slowdown, along with the increased cost of moving goods across the U.S.-Mexico border, likely played a role in rising prices. 

David Wick, whose National Enterprises logistics company owns and operates a network of warehouses and storage yards near the Otay Mesa commercial border crossing, said warehouse rents are falling and vacancies are rising as cross-border trade slows and companies grapple with higher labor and shipping costs. 

“The peak [in border-adjacent warehouse rents] was 2023 to 2024,” Wick said. “Now we’re seeing rents decline…In industrial buildings, [vacancies] are now up to 13 to 14 percent. Tenants just aren’t there to occupy those 100,000-square-foot spaces.” 

Gin and other business experts interviewed for this story all agreed that San Diego’s economy has structured itself so thoroughly around its relationship with Mexico, it would take years to unwind the relationship and reestablish the county’s manufacturing capacity. 

“I don’t think there’s the infrastructure to create that educational pipeline [to train skilled factory workers],” Gin said. “To develop that would take a long time, many years. So, it’s tough for businesses to make that commitment given that the policy could change with the administration.” 

Zamarripa said Mexico has invested heavily in technical skills training in recent years, to the point that universities in Baja California now produce more engineering graduates each year than their San Diego counterparts. 

“They are investing in the workforce development part and gaining ground on that,” Zamarripa said. “We [in the U.S.] have been training our younger generations to go into STEM and highly specialized fields and get their MBAs. But we haven’t been promoting the trades. If we tried to bring assembly work and manufacturing [back to San Diego], I’m not sure we have the workforce or even interest in the workforce for that.” 

Wick was more blunt. 

“I don’t see manufacturers coming here to build a plant,” he said. “Land and labor are just too expensive.” 

As they scramble to respond to Trump’s policy upheaval, San Diego leaders face some difficult choices. 

They can do what they’re doing right now, which mostly amounts to voicing outrage, suing the Trump administration and hoping the whole thing goes away. 

Or they can undertake the slow, painstaking work of adapting to a new reality. 

That process would take years, if not decades, according to experts interviewed for this story. Which means the next 20 years could bring profound changes to San Diego’s economic relationship with Mexico. 

For starters, experts agreed that San Diego’s educational system must revamp itself to train more skilled workers who don’t necessarily have four-year college degrees. 

If San Diego hopes to claim a share of high-tech manufacturing work now mostly done in Mexico, it will have to train a workforce that doesn’t currently exist. 

Wick said the county also would need to make it much easier to build factories. 

“In states that are having economic challenges, they help a [manufacturing] applicant get the project up and running as quick as possible,” Wick said. “That doesn’t occur here in California. People say, ‘Why am I here butting my head against the wall when I don’t get help from the city with permits?’” 

In the near term, Zamarripa said, federal and local officials could speed up efforts to reduce the amount of time it takes to cross the border and complete a newly redesigned commercial border crossing in Otay Mesa. 

More efficient border crossings would make it easier for workers to move back and forth and increase possibilities for cross-border cooperation that don’t necessarily involve shipping goods subject to tariffs, she said. 

Above all, Zamarripa said, the future success of San Diego’s cross-border economy depends on certainty in federal policy. 

“Right now it’s been several months of uncertainty,” she said. “It’s getting to the point where some [business leaders] are saying, ‘Just tell me how much it’s going to be.’ It doesn’t mean all businesses can absorb it. They just want to know what it’s going to be for the next four years so they can plan.” 

San Diego’s binational economy has worked well for many people, especially the highly compensated leaders of biotech and other advanced companies who enjoy a best-of-both-worlds abundance of university-trained researchers in the United States and skilled but low-paid factory workers across the border. 

Looking forward to the next 20 years, policymakers now must decide how to keep the momentum going. Or change course entirely. 

The post Nice Economy – If You Can Keep It  appeared first on Voice of San Diego.