Donald Trump’s recent victory in the United States presidential election has put global supply chains on edge, particularly those that depend on the nearshoring in Mexico and operations financed by Chinese companies. The elected president’s proposal to impose a tariff of 25% on Mexican imports, and up to 100% for goods produced in factories with Chinese capital, threatens to dismantle the model that, in recent years, has redefined trade relations in North America.
A change of wind in Monterrey
In Monterrey, one of Mexico’s main industrial centers, the effects of Trump’s threats are already beginning to be felt. In recent years, this city had witnessed a boom in Chinese investments motivated by trade tensions between Beijing and Washington. Chinese companies, attracted by the benefits of the Agreement between Mexico, the United States and Canada (USMCA), built factories at breakneck speed, taking advantage of the fact that products manufactured in Mexico could enter the US market without tariffs.
However, that enthusiasm has begun to wane. Chinese delegations that used to visit Monterrey’s industrial parks daily have now reduced their trips, and many companies have chosen to adopt a cautious stance. “Trump talks a lot; It depends on how you do it,” commented the manager of a factory financed with Chinese capital in Monterrey, who asked not to be identified.
The uncertainty not only affects companies that already operate in Mexico, but also those that were considering expanding. According to Jorge Guajardo, former Mexican ambassador to China and partner in DGA Group, current conditions discourage new investments. “For six years I promoted the arrival of Chinese investments in Mexico, but now my advice is ‘stop and wait,’” he said.
The paradox of nearshoring
Interestingly, the model nearshoring that it now faces risks was in part a direct consequence of Trump’s protectionist policies during his first term. The trade war between China and the United States pushed many Chinese companies to move their production to Mexico to avoid high tariffs imposed on products manufactured in China. This move allowed companies to maintain competitive access to the US market while reducing logistics costs.
This change led to the emergence of a new label: “Made by China” instead of “Made in China.” However, the possibility that Trump follows through on his threats to impose significant tariffs on Mexican imports could eliminate the model’s competitive advantages, forcing companies to reconsider their production and export strategies.
Although the proposed tariffs are a direct hit to commerce, their implications go beyond costs. Uncertainty generates a domino effect in business decision-making, delaying investments, expanding execution times and, in some cases, leading companies to consider other destinations for their production.
Furthermore, trade tensions between the United States, Mexico and China do not develop in a vacuum. The growing global competitiveness due to the dominance of supply chains has led other countries to strengthen their investment attraction policies. In this context, Trump’s return to power could catalyze a reconfiguration of trade routes in North America and Asia.
Trump’s policies not only affect foreign companies operating in Mexico, but also the Mexican economy as a whole. The proposed tariffs could make products exported to the United States more expensive, negatively impacting sectors that have driven economic growth in key regions of the country. In turn, this could weaken Mexico’s competitiveness compared to other emerging countries.
In political terms, the measures pose a challenge for the Mexican administration, which has opted to strengthen trilateral trade under the T-MEC. Furthermore, Mexico faces the difficult task of balancing its relationship with the United States, its main trading partner, while maintaining its openness to Chinese investments, which have proven to be a driver of development in recent years.
A setback for global trade?
Trump’s threat to increase tariffs also fits into a broader trend of retreat in globalization. For years, economies were integrated under the premise that trade borders should be opened to foster growth and competitiveness. However, geopolitical tensions, exacerbated by the pandemic and power rivalries, have challenged this narrative.
For Chinese companies looking to expand in Latin America, Trump’s stance is a reminder that the political risks are as important as the economic costs. And for Mexico, the challenge will be to quickly adapt to a trade landscape that appears increasingly fragmented and unpredictable.
Ultimately, the future of nearshoring in Mexico will depend on how Trump’s trade policies develop and the ability of companies to overcome the challenges they impose. What is certain is that, under the president-elect, trilateral trade will face new pressures, and the dream of nearshoring could come to an end sooner than expected.
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