Author: Derrick Baldwin

For decades, the US, Canada, and Mexico have worked together to build one of the most integrated manufacturing ecosystems in the world. From automotive supply chains that crisscross borders to aerospace components built through cooperative agreements, North American manufacturing has thrived under trade agreements like NAFTA and its current successor, the USMCA. 

But with President Donald Trump reintroducing tariffs and igniting what some are calling a trade war, the future of this cooperation – and the prosperity it has brought about – is being tested.

History of Cross-Border Manufacturing

North America’s industrial backbone is built on regional collaboration. NAFTA, implemented in 1994, eliminated most tariffs between the three countries and set the stage for the complex, cross-border supply chains we see today. This made possible a North American supply chain that saw goods and materials cross borders many times before finally being sent to market.

Companies took advantage of lower production costs in Mexico, the skilled workforce in Canada, and the advanced infrastructure and design capability in the United States to create an efficient, mutually beneficial and cooperative manufacturing system. The result was probably the most advanced and successful manufacturing bloc the world has ever seen.

The USMCA, which replaced NAFTA in 2020, largely maintained these benefits for workers and companies alike, while tightening labor and environmental regulations, particularly for manufacturing in Mexico. This ensured fairer wages for workers and greater intellectual property protections for companies operating across borders.

Tariff Shocks: Trump’s Latest Move

Despite the benefits of USMCA and decades of free trade, President Trump has called North American cooperative manufacturing into question by announcing a fresh round of steep tariffs on Canada and Mexico. 

On March 4th, Washington began levying a 25% tariff on all imports from Mexico and Canada. Only Canadian oil and gas are excepted, but they are still subject to a 10% tariff. China is also subject to an additional 10% tariff, on top of the 10% Trump levied last month. All of this was enacted unilaterally without any say from Congress and in direct contradiction to the USMCA treaty. The next day, Trump extended a temporary one-month exemption for automakers to relocate production to the US.

The Big Three automakers – General Motors, Ford, and Stellantis – are particularly affected. With plants and supply chains deeply embedded in Mexico and Canada, shifting production within a month is unrealistic. Ford CEO Jim Farley noted that while Ford could absorb the tariffs short-term, prolonged duties would create industry-wide disruption.

The result? Higher car prices. Analysts estimate tariffs could drive up vehicle costs by as much as $12,000, making affordability a major concern for consumers and dealerships alike.

The Automotive Sector: A Prime Example of North American Cooperative Manufacturing

The auto industry is the best case study for North America’s interconnected manufacturing. Car parts can cross borders multiple times before final assembly. And this helps American business. The USMCA requires at least 75% of a vehicle’s components to be sourced from North America to qualify for duty-free treatment. These strict “rules of origin” were designed to keep manufacturing within the region while maintaining cost efficiencies, thus producing affordable vehicles while creating jobs in the US.

However, if tariffs remain in place, US automakers might have to rethink their strategies. Some may choose to absorb higher costs, while others could pass them on to consumers or relocate production – though the latter is costly and time-intensive. Either way, the likely result will be higher prices for consumers – as with many other industries that rely on North America’s cooperative manufacturing advantages.

Broader Manufacturing Impacts

While the automotive industry is in the spotlight, other sectors are feeling the heat too. Electronics, aerospace, and industrial machinery companies rely on North America’s integrated supply chain. The USMCA’s strong intellectual property protections and labor provisions have made Mexico an attractive destination for manufacturing, offering cost savings without compromising security or quality.

But with Trump’s tariff push, companies must decide whether to endure higher costs or restructure supply chains. Some may explore shifting operations within North America to optimize costs under the USMCA’s rules. Others might look further afield to countries outside North America to sidestep tariffs entirely – undermining the very goals of reshoring efforts.

Navigating an Uncertain Future

North American cooperative manufacturing has endured policy shifts, trade renegotiations, and political shifts. While Trump’s tariffs add new challenges, they don’t erase the long-term benefits of regional collaboration. The USMCA still offers substantial advantages for companies that understand its provisions and structure their operations accordingly.

As businesses assess their next steps, flexibility will be key. Whether navigating tariffs, optimizing supply chains under USMCA, or balancing costs, manufacturers must adapt while keeping an eye on policy changes that could shape the future of North American trade.

Growing from an impoverished and agriculture-based economy, Mexico has cemented its status in recent decades as a manufacturing and industrial powerhouse. Through innovation, continued investment from both public and private sectors, and an aggressive free-trade policy, Mexico has crawled out of poverty and into a leading role in the global marketplace.

Indeed, the once impoverished nation has solidified its position as a leading global manufacturing hub, attracting companies from many diverse industries. And with a well-developed network of industrial clusters, the country offers strategic advantages to businesses looking to nearshore production. 

Mexico’s industry clusters – geographic concentrations of interconnected industries – foster efficiency, innovation, and economic growth for the people of Mexico and the corporations that do business there. From aerospace to packaging and plastics, Mexico’s industrial landscape is as varied as it is dynamic. 

As we will see below, Mexico has something to offer virtually every manufacturer, although some regions are more networked and optimized for a specific industry than other regions.

Northern Mexico: Advanced Manufacturing and Industrial Powerhouse

The northern states that comprise Mexico’s border region with the United States include:

• Baja California
• Sonora
• Chihuahua
• Coahuila
• Nuevo León
• Tamaulipas

These states are home to some of Mexico’s most technologically advanced clusters, largely due to their proximity to the United States. This region has long been a manufacturing stronghold, particularly in high-value sectors. Some of the key Mexican industry clusters in this region include the following sectors.

Aerospace: 

Concentrated in Baja California, Chihuahua, and Sonora, Mexico’s aerospace sector has experienced significant growth, driven by international investment and demand for components. A shocking 400+ aerospace companies now operate in the country, producing parts such as turbine components and fuselage sections. This major Mexican industry has seen an annual growth rate of 8% over the past five years, with exports surpassing US$7 billion annually. 

Automotive:

Nuevo León and Coahuila are major hubs for automotive manufacturing, housing assembly plants for General Motors, Kia, and other automakers. In 2024, Mexico’s automotive sector reached a record production of 3.9 million light vehicles, a 5.6% increase from 2023, surpassing the previous record set in 2017. 

Electronics:

With companies like Foxconn and Samsung investing in manufacturing facilities, the northern region of Mexico is a key player in global electronics production, specializing in semiconductors and consumer devices.

Medical Devices:

Tijuana is a well-known center for medical device manufacturing, producing high-quality surgical instruments, catheters, and diagnostic equipment.

Packaging:

Packaging production, particularly for the food and beverage sector, has expanded significantly in northern Mexico, with advanced facilities providing materials to both domestic and international markets.

Central-North Mexico: Manufacturing Diversity and Innovation

The central-north region of Mexico – including Jalisco, San Luis Potosí, and Guanajuato – features a diverse range of industrial clusters, with a strong emphasis on manufacturing and technology. Key industries thriving here include:

Automotive:

Guanajuato, Querétaro, and San Luis Potosí have become hotspots for Mexican automotive manufacturing, with major automakers and suppliers establishing operations to serve North American markets.

Electronics:

Guadalajara, known as the “Silicon Valley of Mexico,” is a major electronics manufacturing hub, attracting investments from IBM, Intel, and HP.

Molding and Plastics:

Mexico’s molding industry thrives in Jalisco and Guanajuato, serving industries such as automotive, medical devices, and consumer goods.

Food and Beverage Manufacturing:

With well-established processing plants and a robust agricultural sector, the central-north region is a key player in Mexico’s food industry.

Central Mexico: Economic and Industrial Heartland

The central region of Mexico is home to Mexico City, the State of Mexico, Querétaro, and Puebla – all critical economic centers for manufacturing and industry. This heartland features a diverse mix of manufacturing and service-oriented Mexican industry clusters. Some of these include:

• Financial and Business Services: Mexico City serves as the country’s financial hub, hosting corporate headquarters and administrative services that support industrial operations nationwide.
  
• Pharmaceutical and Medical Devices: Querétaro and Mexico City are prominent centers for medical device production, research, and pharmaceutical manufacturing.
  
• Cosmetics: The Mexican cosmetics industry is growing rapidly, with major brands investing in production facilities to serve both local and export markets.
  
• Infrastructure and Construction: Given its dense population and economic activity, the central region has a strong presence in infrastructure projects, including energy generation and distribution.

Southern Mexico: Emerging Opportunities

While the southern region has historically seen slower industrial development and noticeably less manufacturing, several Mexican industry clusters are gaining traction here, fueled by natural resources and growing investments, such as:

• Oil and Gas: Campeche, Veracruz, and Tabasco are Mexico’s primary oil and gas extraction centers, with major refineries and offshore drilling operations.
  
• Tourism and Hospitality: Quintana Roo and Yucatán are at the heart of Mexico’s tourism industry, generating billions in revenue annually.
  
• Apparel Manufacturing: Oaxaca and Guerrero host a strong apparel sector, producing textiles and clothing for domestic and export markets.

With a strong foundation in manufacturing, technology, and resource-based industries, Mexico is poised for continued industrial expansion. Mexico’s industry clusters create a highly competitive environment for successful manufacturing and international business. And this carefully crafted ecosystem in turn fosters innovation, efficiency, and economic growth. For businesses considering nearshoring or investment in Mexico, the nation’s diverse and strategically located industry clusters offer compelling advantages that align with today’s changing manufacturing needs and position businesses to strategically compete and succeed in the global economy.

The Trump tariffs threatening Mexico, Canada, and now the whole world are intended to benefit US industries and interests and perhaps even lower illegal immigration and drug smuggling. But analysts and industries closest to the unfolding drama are concerned the new tariffs will actually have the opposite effect. 

What may sound like a common-sense approach to international trade and a sound “America First” policy could wind up hurting a crucial sector of the United States economy: US automakers. Due to the highly integrated nature of the North American trade bloc, US automakers rely heavily on parts and materials sourced from Mexico and Canada. And analysts are pointing out that the Trump tariffs may actually have a net negative impact on US automakers as well as on the American consumer.

The Developing Tariff War

Incoming President Donald Trump immediately made good on his campaign promise to slap high tariffs on some of the nation’s top trading partners, including Mexico. On Feb. 1, he signed an executive order to override the duly ratified USMCA treaty that guarantees duty-free trade between the countries on almost all items and materials. Originally known as NAFTA, this free-trade agreement has been in place for decades, and the US economy and US carmakers have grown heavily dependent on this favorable cooperative arrangement.

In fact, most automobiles sold in the United States contain a mix of labor, parts, and materials from all three signatory countries. The United States-Mexico-Canada agreement that Trump, himself, negotiated in his first term contributes directly to US jobs. It is estimated that 40% of the inputs for vehicles assembled in the US come from Mexico and Canada. 

However, President Trump quickly postponed the 25% tariffs on Canada and Mexico for 30 days after receiving some concessions from the governments of those respective countries. Specifically, Mexico’s President Sheinbaum agreed to send 10,000 national guard members to the northern border to help prevent the flow of fentanyl and illegal immigrants into the US (although most fentanyl is smuggled by US citizens) and asked that the US president also stop the flow of illegal US firearms and weapons into Mexico, where they are used to arm the cartels there. 

However, the 25% blanket tariffs on Canada and Mexico are set to go into effect in early March, and a 10% tariff has already gone into effect on Chinese imports. Likewise, high tariffs are scheduled for all steel and aluminum imports globally on March 12, and “reciprocal tariffs” on all countries currently levying tariffs on US goods is imminent, likely to be implemented this week. 

Mexico, Canada, and others have also announced they will respond with high tariffs on US goods, themselves, stoking fears of a developing trade war on a global scale. 

US Automakers Worried

Automotive manufacturing is one of Mexico’s biggest industries, largely due to the integration with the US automotive industry and direct role they play in manufacturing major US and other brands. As such, several industry leaders are eyeing the incoming tariffs with concern and frustration. These American carmakers are among the biggest players in Mexico’s and Canada’s automotive industries and will likely be hurt the most from what is possibly an illegal violation of the terms of the USMCA. 

General Motors (GM) builds the Chevy Blazer, Chevy Blazer EV, Equinox EV, and other electric vehicles at its plant in Ramos Arizpe, Mexico. They also rely heavily on their plant in San Luis Potosí to manufacture their second-bestselling vehicle, the Equinox. Their Silverado and other popular vehicles are also manufactured in other plants in both Mexico and Canada. Losing duty-free access to these locations would place a huge burden on their Indiana and Michigan assembly lines, resulting in shortages and price hikes.

Ford builds some of their most popular and affordable models like the Bronco Sport, Mustang Mach-E, and Maverick in Hermosillo and Cuautitlán Izcalli, Mexico as well as in China. Ford CEO, Jim Farley, has said that the company will have to make major shifts in their supply chain to adapt:

There is no question that tariffs at 25% level from Canada and Mexico, if they’re protracted, would have a huge impact on our industry with billions of dollars of industry profits wiped out and adverse effect on the U.S. jobs as well as the entire value system in our industry. Tariffs would also mean higher prices for customers.  – Jim Farley, Ford CEO

Toyota, Honda, Nissan, Mercedes-Benz, and other non-domestic brands popular in the US would also suffer from the impact of the Trump tariffs. These automakers rely heavily on production in Mexico and Canada to supply US consumers at an affordable price point. 25% tariffs could mean huge price hikes on new cars and even the discontinuation of popular models sold in the US, as well as a deep disruptions in US supply chains, resulting in job losses and even plant closures in the United States.

Fallout for US Carmakers and Auto Industry

The Detroit Three, which comprise the lion’s share of domestic auto production inside the United States, would experience substantial losses. Indeed, the impact of the Trump Tariffs on these US Automakers is difficult to measure. 

Stellantis manufactures approximately 39% of its North American units in Mexico and Canada. GM manufactures approximately 36% of North American vehicles there. And Ford makes about 18% in these USMCA countries. Industry analysts estimate the initial tariffs (not counting the ensuing retaliatory and reciprocal tariffs) could cost US automakers $110 million USD per day and approximately $40 billion per year. These costs would drastically reduce profitability for these US automotive companies and dramatically raise the prices on their popular models sold here.

Even for those automobiles assembled entirely in the United States, US automakers rely on parts made in Canada and Mexico for about 40% of each vehicle. These parts would be subject to the 25% tariffs.  

And the additional 25% tariffs about to be imposed on all imported steel and aluminum would only increase the burden on these US automakers further. What is among the primary materials used to manufacture cars and trucks is expected to become increasingly scarce and come at a much higher price to the US companies sourcing these materials for vehicles sold in the US. 

Glenn Stevens Jr., Executive Director for MichAuto, an industry association for Michigan’s automakers sounded this alarm:

We’re concerned about the downstream effects…the short-term benefits of higher prices for steel and aluminum for domestic production are outweighed by a decrease in downstream effects…you can’t change supply chains very quickly, and you certainly can’t change manufacturing locations very quickly.  – Glenn Stevens Jr., Executive Director, MichAuto

Marcus Noland, trade policy expert at the Peterson Institute for International Economics, noted the irony in all of this, pointing out that these Trump tariffs will not only impact on US automakers and consumers, but could actually result in even more illegal immigration:

The tariffs would really hit the automobile industry hard because the motor vehicle industries of the U.S., Mexico and Canada are very intertwined…Parts will cross the border seven to eight times before final assembly, and the tariffs are applied every time a part crosses — so costs would go up very quickly…you’ll have unemployed people along the U.S. border, and the ironic thing is one of the reasons for this action was illegal migration, and it could actually incentivize illegal migration. By damaging the Mexican economy, you would probably increase the levels of illegal migration.”  – Marcus Noland, Peterson Institute for International Economics

In recent years, Mexico’s manufacturing sector has experienced a significant transformation. This shift is largely due to the integration of automation technologies and the embracing of cutting-edge technologies. Automation in Mexico is growing and rapidly changing the manufacturing landscape in the Latin American country. And it has not only enhanced production efficiency but also redefined the country’s role in the global supply chain. 

Forward-looking business seeking competitive advantages in the global economy are beginning to sit up and take notice. And it’s no surprise why this is. Understanding Mexico’s automation journey offers valuable insights into future opportunities and challenges.

The Rise of Robotics and AI in Mexican Factories

Automation in Mexico is gaining momentum, with industries increasingly adopting robotics and artificial intelligence (AI) to streamline operations. Between 2017 and 2022, Mexican imports of industrial robots saw a 23% increase, reaching $4.14 billion. This surge indicates a growing commitment to modernizing manufacturing processes.

Several sectors are leading the way in this technological reboot. Automotive and electronics, for example, are at the forefront of adopting AI tools for automated processes. Additionally, the automotive industry in Mexico is utilizing advanced robotics for precision tasks, enhancing both speed and accuracy in production. 

Similarly, the electronics industry leverages AI-driven systems for quality control and assembly line optimization. This widespread implementation underscores a national trend towards embracing Industry 4.0 practices.

Balancing Efficiency with Labor

One of Mexico’s traditional advantages in manufacturing has always been its cost-effective labor force. As such, it may come as a surprise that Mexico places such a high priority on automation and AI tools. However, while Mexico places a high value on human resources, it views automation, not as a replacement for people but rather as a complement. 

In Mexico, a highly skilled, highly trained, low-cost workforce is aided and enhanced by assigning repetitive and hazardous tasks to machines, allowing human workers to focus on more complex roles. This makes human workers more productive and cost efficient, allowing Mexican factories to generate more profitability overall.

By adopting automation in Mexico, manufacturers there can increase productivity without significantly inflating labor costs. This balance ensures that Mexico remains an attractive destination for manufacturing investments. Moreover, the combination of skilled labor and advanced technology positions the country to meet the demands of high-precision industries, further solidifying its competitive edge in an evolving marketplace.

Challenges and Opportunities in Adopting Automation

While the benefits of automation are clear, the transition presents several challenges. No rose is without its potential thorns.  

Specifically, the initial capital investment required for advanced machinery and technology can be substantial, even prohibitive, potentially deterring small and medium-sized enterprises. Additionally, there is a pressing need for workforce upskilling to manage and maintain automated systems effectively.

However, these challenges also present opportunities. Government initiatives and private sector partnerships are emerging to support businesses in this transition. Training programs aimed at developing technical skills among workers are gaining traction, ensuring a ready pool of talent to support automated operations. 

Furthermore, as global supply chains become more complex, Mexico’s strategic location and enhanced manufacturing capabilities – in addition to its numerous free trade agreements – make it a pivotal player in international trade.

Comparing Automation in Mexico to China and the US

Globally, automation is reshaping manufacturing landscapes, with countries like China and the United States leading the charge. China is no stranger to AI and automation. Indeed, the country has been embracing robotics for decades, rapidly adopting automation to offset rising labor costs and maintain its manufacturing dominance. And the United States, focusing more on reshoring initiatives, leverages automation to revitalize its industrial base.

But Mexico’s approach to automation is highly strategic, aiming to enhance its existing manufacturing strengths without displacing its labor advantage. The country’s proximity to the US offers certain logistical benefits. And with increased automation, Mexico can provide a compelling alternative to Asian manufacturing hubs. This blend of human skill and technological advancement positions Mexico uniquely in the global market.

In summary, automation in Mexico is an undeniable manufacturing trend there, transforming the sector and paving the way for future growth. Through rapid technological adoption, the country is boosting efficiency and opening new avenues for the future. Through embracing robotics and AI, Mexican industries are not only enhancing their competitiveness but also redefining their role in the global supply chain. 

Mexico is rising to meet new challenges with proactive strategies. And by all accounts, the country stands poised to solidify its position as a leader in modern manufacturing by integrating technological advancements with its inherent advantages.

When US companies set out to become more competitive, they inevitably come to the question of outsourcing. And of course, one of the first things to outsource is manufacturing. There are numerous reasons why successful companies nearshore manufacturing to Mexico and other foreign destinations. 

But that’s not the only part of the value chain that should sometimes be outsourced. 

Product design is vitally important, even though it can be quite difficult to outsource this critical stage. But companies can’t always afford to keep each phase in house. There’s a balance to be struck. And sometimes the best way to remain competitive is to understand the strategic importance of outsourcing product design.

Questions to Ask Before You Outsource Product Design

Product design – sometimes called industrial product design or IPD – is an incredibly important phase of the manufacturing process. In fact, this is the most crucial phase of bringing a product to market. It’s when you determine how to meet a market demand in a cost-efficient and attractive way. It’s when you envision every aspect of the product, both inside and outside, creating something new that will create a lasting impression on the customer and a profitable revenue stream for your company.

But it can be difficult to decide how to approach this phase. One way to home in on the right answers is to ask the right questions.  Examine whether or not your company’s situation is equal to the task. For example, what about your engineering staff? If their expertise is limited to only a few core industries, you might benefit from the expansion of outsourcing.

How about internal resources? Are they becoming more limited? Then it’s possibly a smart move to outsource product design. Likewise, if development budgets are typically over budget, this is a good indicator that outsourcing this phase will positively impact your operation.

Another good question to help you determine which route to go is, can you keep up with competitors in this market? If your new product is in a space already dominated by someone else, this might mean you need some outside help – specialists can bring more to the table than your already limited internal resources. And chances are, they will create more cost-effective manufacturing processes than your own R&D team.  

Top Reasons to Outsource Product Design

Obviously, if you answered in the affirmative to any of the questions discussed previously, it’s time to consider the many advantages of product design outsourcing. But to better understand why this is, let’s discuss some of the many reasons outsourcing this phase makes sense. 

One of the most compelling advantages lies in the simple cost savings. By outsourcing, companies sidestep the hefty expenses tied to maintaining an in-house design team, such as salaries, benefits, and the ongoing investment in state-of-the-art tools and training. Instead, they can tap into specialized expertise on a project-by-project basis, converting fixed costs into variable ones. And this model not only cuts overhead but also grants access to global talent pools brimming with experience across industries.

But that’s not the only reason to outsource product design. There is also the critical advantage of tapping into the external perspective brought by outsourced design firms. In-house teams, no matter how skilled, can sometimes fall into predictable patterns or become overly focused on specific niches. 

Outsourced designers, on the other hand, approach projects with fresh eyes, integrating insights from various disciplines and industries. This multidisciplinary input is what can lead some companies to discover innovative solutions that resonate more effectively with diverse markets. And what’s more, these teams are also often attuned to global trends, which enables businesses to design products that appeal to international audiences and stand out in competitive markets.

Speed and scalability further solidify the case for outsourcing. External teams, dedicated solely to design, can fast-track development timelines, helping businesses bring products to market faster. This agility is especially valuable in dynamic markets where timing can make or break a product’s success. 

Last, but not least, outsourcing the product design phase allows for unmatched flexibility. Companies can scale their design capabilities up or down as needed without the logistical headaches of hiring or downsizing staff. 

And these benefits, when coupled with an honest examination of your company’s in-house abilities, often leads to the conclusion that outsourcing product design will bring clear benefits for most companies. And these advantages are only compounded when US companies outsource to a favorable location like Mexico, where skilled teams are highly trained and highly affordable.

Whether it’s a startup seeking a competitive edge or an established company aiming to innovate, outsourcing product design typically provides a strategic pathway to efficiency, creativity, and market relevance.

US companies interested in taking advantage of the Mexican nearshoring option should have a firm grasp of the country’s intellectual property (IP) laws. While many popular outsourcing destinations do not adequately safeguard IP, Mexico’s intellectual property protections are quite extensive. As a manufacturing country, Mexico has placed considerable emphasis on securing and protecting the IP rights of those doing business there.

As a result, the country has a well-established legal framework for foreign companies relocating operations there. And recent laws have only strengthened Mexico’s intellectual property protections, modernizing them and closing loopholes. 

Mexico is focused on manufacturing for export. Their many FTAs give businesses there free-trade access to most of the global market. And these manufacturers benefit substantially from a well-established, well-defined, and effectively enforced IP protection apparatus that makes this success in international trade possible.

The Laws Governing IP in Mexico 

Mexico has a long history of intellectual property (IP) protection, beginning with the 1832 “Law on Property Rights for Inventors.” Over time, this legal framework evolved through multiple iterations, including the 1943 “Law of Industrial Property” and the 1991 “New Law of Industrial Property,” each adapting to meet international standards. The 2020 “Federal Law for Protection of Industrial Property” modernized these protections and introduced stricter patent rules, which enhanced trade secret safeguards and created stronger trademark enforcement.

Today, under the “Federal Law for Protection of Industrial Property,” patents can cover new uses for substances, while trademarks enjoy a ten-year validity with expanded protection against bad-faith filings. Trade secret violations now constitute infringements, entitling victims to damages, and counterfeiting penalties include destruction of goods and significant fines. This law also empowers Mexico’s IP enforcement agencies to work alongside federal and local authorities to combat violations, ensuring a robust defense of industrial property.

To modernize IP protections under NAFTA, the USMCA trade agreement further strengthened IP protections in Mexico, and more closely aligned them with US and Canadian standards. It introduced measures like predefined damages for trademark infringement, improved biologic protections, and a notice-and-takedown system for ISPs. Mexico’s law now allows post-examination patent corrections and enforces stronger safeguards for trade secrets, reflecting the country’s commitment to maintaining competitive IP standards in a globalized market.

Key Areas of IP Protection in Mexico

Understanding Mexico’s intellectual property protections is essential for businesses looking to protect their innovations and compete in the global marketplace. Fortunately for US businesses, Mexico offers a robust legal framework not dissimilar to US standards. While structured somewhat differently, Mexican law provides for aggressive protection in key areas like trademarks, patents, trade secrets, and other IP protections, helping businesses safeguard their unique creations and ideas. Some of the key areas Mexican IP law protects include:

• Trade Mark: Mexico’s IP law protects trademarks for 10 years with indefinite renewals if used; trademarks can include names, shapes, sounds, and other distinctive elements, using a “first-to-use” and “registration” system.
• Patents: Patents are granted under a “first-to-file” system, with protection lasting 20 years from filing; a one-year grace period is allowed for public disclosures, and non-use may lead to compulsory licensing.
• Industrial Designs Protection: Industrial designs are protected for up to 25 years through five-year renewable terms; Mexico uses a “first-to-file” system and offers a one-year grace period for public disclosures.
• PCT Patent: PCT applications allow inventors to seek patent protection in Mexico via international filings, aligning with global standards for streamlined multi-country coverage.
• Trade Secrets: Mexican law safeguards trade secrets as confidential information providing business advantages, with legal remedies available for misappropriation or theft.
• Moral Rights: Moral rights in Mexico protect creators’ personal connection to their works, ensuring recognition, integrity, and control over usage, irrespective of economic rights.
• Transfer of Trade Mark Ownership: Mexican law allows trademark ownership transfers via assignments or licensing, with specific procedures to ensure legal recognition.
• The Value of Intellectual Property Assets: Mexico’s IP framework emphasizes the economic and strategic importance of patents, trademarks, and other IP assets, supporting valuation and enforcement mechanisms.

Enforcement Bodies

While Mexico’s intellectual property protections are structured differently than in the United States, they are thoroughly enforced and administered by several competent bodies. Manufacturing companies doing business in Mexico benefit from dedicated protection agencies, including the following government departments:

• The Mexican Institute of Industrial Property (IMPI): This body administers and oversees patent protection and trademark registration as well as enforces intellectual property infringement.
  
• The National Institute of Copyright (INDAUTOR): This agency manages copyright registrations and administers disputes between copyright holders.
  
• The UEIDDAPI: This unit within the Office of the Attorney General has been tasked with the prosecution of intellectual property related crimes.
  
• Mexican Customs Service (Aduanas): This unit oversees the task of restricting the movement of illegal goods across the country’s borders.
  
• The Federal Commission for the Protection Against Sanitary Risks (COFEPRIS): This entity is responsible for regulating processed foods, medical devices, and pharmaceuticals.

The Benefits of Mexico

For US manufacturers, Mexico is a land of opportunity that boasts many unique advantages. And with the steps Mexico has taken in creating and enforcing a robust legal framework for protecting IP, manufacturers can invest there with confidence.

Even though this regulatory framework is not the same as that in the US, the USMCA and other recent updates to Mexico’s intellectual property protections have ensured enforcement on the same level and roughly equal to the standards enjoyed in the US. With a strong commitment to ensuring a secure environment for international manufacturing and a history of prioritizing IP protections, Mexico status as a safe and beneficial place to manufacture will endure.

Electric vehicles (EVs) are taking the world by storm, and everyone’s scrambling to get in on the action. And while China and Germany are dominating the headlines, this revolution has also found its way to North America. But it extends beyond the United States.

Mexico is quietly building its own EV empire. From battery production to final assembly, the Mexico electric vehicle supply chain is emerging as a vital player on the global marketplace. And it’s not by accident – it’s by design.

Why Mexico Is a Big Deal in the EV World

If your company is looking to ride the EV wave, Mexico might just be your golden ticket. Why? Three words: location, cost, expertise. Let’s break it down.

First, Mexico’s proximity to the United States is a no-brainer. It’s like having a factory in your backyard. The concept is known as nearshoring as opposed to offshoring. Plus, thanks to the USMCA (United States-Mexico-Canada Agreement), companies get tariff-free trade on EVs and components. This is a real game-changer for keeping costs low and delivery times fast.

Second, Mexico isn’t new to the automotive game. With decades of experience and a skilled workforce, the country has built a rock-solid manufacturing ecosystem. Companies like Tesla, GM, and BMW aren’t pouring billions into Mexico for nothing. They’re betting on its ability to deliver—and they’re winning.

Mexico didn’t just wake up one day and decide to join the EV revolution. It’s been laying the groundwork for years. Here’s what makes it stand out:

• Prime Location and Trade Deals: Due to proximity to the US and the sheer number of free trade agreements Mexico has, electric vehicle manufacturers are eager to establish operations in this prime location.
• Automotive Expertise: As one of Mexico’s top exports, vehicle manufacturing there is a well-oiled machine that is now transitioning from traditional cars to EVs.
• Skilled but Affordable Labor: Mexico’s workforce isn’t just cost-effective; it’s highly capable of handling the complex demands of EV manufacturing.

Put all this together, and you’ve got a manufacturing environment that’s efficient, adaptable, and ready to take on the future.

Opportunities Across the EV Supply Chain

Mexico isn’t just assembling EVs. The country’s skilled manufacturing workforce and modernized infrastructure, Mexico is stepping up across the entire supply chain. Here’s where the action is:

• Battery Production: Mexico’s lithium deposits, especially in the north, are attracting big investments in battery plants. 
• Charging Infrastructure: Mexican companies are ramping up production of EV chargers and components, helping pave the way for electric mobility.
• Components Galore: From electric motors to lightweight materials, Mexico’s factories are making nearly all the high-tech parts that make EVs go.

These aren’t just opportunities. These are signals that Mexico is aiming to lead the way in the unfolding EV revolution.

Because Mexico’s government knows what is at stake, they’re rolling out the red carpet for EV manufacturers. Tax breaks, grants, and other incentives are making it easier than ever to invest. But it’s not just about money. Mexico is also leaning hard into renewable energy. From solar farms to green hydrogen projects, the country is aligning its policies with global sustainability goals—a perfect match for the EV industry’s focus on decarbonization.

Where to Set Up Shop: Top EV Manufacturing Hotspots

Location matters, and Mexico’s got plenty of options. Several regions are ramping up to play a pivotal role in Mexico’s electric vehicle manufacturing industry. Here are some of the primary locations driving this new industry:

• Bajío Region: Think of this as the heart of Mexico’s automotive industry. It’s got the supply chains and the skilled workers to back it up.
• Monterrey: Close to the US border, Monterrey is a logistics dream come true.
• Sonora: Dubbed “Mexico’s Lithium Triangle,” this region is buzzing with activity in lithium mining and battery production.

Each spot has its own perks, so it’s all about finding the right fit for your operation. Some of the major players in the EV industry have already set up shop in these regions, including:

• Tesla
• General Motors
• BMW

Mexico Electric Vehicle Manufacturing Challenges

Of course, no venture is without its hurdles. And Mexico’s EV sector is no exception. But the good news? The challenges of doing business in Mexico’s EV industry are manageable:

• Supply Chain Snags: Limited lithium refining and material shortages mean you’ll need strong partnerships and careful planning.
• Energy Infrastructure: Renewable energy is growing, but gaps remain. Collaborating on energy projects can be a smart move.
• Regulatory Maze: Permits, labor laws, and customs can be tricky, but shelter service providers can help you navigate the red tape like a pro.

Face these challenges head-on, and you’ll be primed for success.

Ready to Make Your Move?

For US manufacturers, Mexico isn’t just a cost-saving option. It’s a strategic powerhouse for innovation and resilience in the EV market. With the state of EV manufacturing in Mexico primed for explosive growth, the time to act is now. Start with a feasibility study, scout your ideal location, and partner with experts like shelter services to ensure a smooth entry.

The EV wave doesn’t appear to be slowing. Forward-thinking manufacturers stand to gain by investing in a Mexican operation. With its unbeatable mix of location, expertise, and industry-friendly policies, the country is poised to be a leader in the global EV market. Dive in and let Mexico be the launchpad for your EV success story.

With incoming President Donald Trump talking about levying 25% tariffs on Mexican goods, many are concerned that manufacturing in Mexico may be a risky move. But what they don’t understand is just how embedded the Latin American country is on a global scale. And this brings up the important question, just how many free trade agreements (FTAs) does Mexico have?

While Trump is unlikely to start a trade war with the United States’ top trade partner, it’s nevertheless quite noteworthy just how extensive the country’s trade network extends and how many free trade agreements Mexico has. 

Mexico trades with many countries, and not just North America. In fact, Mexico holds the crown for the most FTAs of any other nation in the world, giving manufacturers access to a vast global market. If you’re thinking about nearshoring your production to Mexico, here’s why its trade network is a game-changer – in spite of the chatter about US tariffs.

The Power of USMCA

Let’s start with the big one: the United States-Mexico-Canada Agreement (USMCA). This updated version of NAFTA modernized trade rules for the 21st century. It’s absolutely packed with provisions that incentivize North American manufacturing while offering strong protections for workers and intellectual property. For example:

• Country of Origin Rules: Vehicles with 75% North American-made parts qualify for zero tariffs.
• Labor Standards: Manufacturers must pay a percentage of their workforce at least $16 per hour to maintain tariff-free status on goods.
• IP Protections: Digital products like software and e-books are duty-free, and source code sharing requirements are restricted.

The result? A robust agreement that fuels regional trade while giving US businesses an incentive to operate just across the border.

Beyond North America: A World of Opportunities

While USMCA simplifies trade within the region, Mexico’s global network of FTAs is what truly sets it apart. Indeed, Mexico holds the crown for the most FTAs of any nation, with 13 free trade agreements (FTAs) spanning at least 50 countries, giving manufacturers access to a vast global market. 

No other country in the world has this many FTAs. And these agreements open doors to major markets across Europe, Asia, and Latin America, offering businesses flexibility and resilience in their supply chains. Mexico is a signatory to most of the major FTAs of the world. But let’s break down every one of the free trade agreements Mexico has signed.

1. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

When the U.S. opted out of the Trans-Pacific Partnership (TPP), Mexico stepped up to join. This agreement slashes tariffs across all sectors, creating lucrative opportunities for businesses targeting the Asia-Pacific region. This agreement gives Mexico preferential access to:

• Canada
• Australia
• Chile
• Japan
• Malaysia
• New Zealand
• Peru
• Singapore
• Vietnam

2. The EU-Mexico Association Agreement

Europe is another powerhouse market Mexico has tapped into. The EU-Mexico FTA eliminates duties on 99% of traded goods, excluding a handful of categories like dairy and some auto products. Plus, the agreement aligns with the Paris Climate Agreement, ensuring sustainable trade practices. This agreement grants trade access to all European Union countries:

• Austria
• Belgium
• Bulgaria
• Croatia
• Cyprus
• Czechia
• Denmark
• Estonia
• Finland
• France
• Germany
• Greece
• Hungary
• Ireland
• Italy
• Latvia
• Lithuania
• Luxembourg
• Malta
• Netherlands
• Poland
• Portugal
• Romania
• Slovakia
• Slovenia
• Spain
• Sweden
  

3. The European Free Trade Association (EFTA)

This FTA progressively removes tariffs between Mexico and all the northern European member states of the EFTA:

• Iceland
• Liechtenstein
• Norway
• Switzerland

4. The Pacific Alliance

Mexico’s ties to its southern neighbors are just as impressive as any others. The Pacific Alliance has eliminated 90% of tariffs among member states. This makes it easier for manufacturers to source materials and export finished goods across the Americas. This agreement opens up Mexican free trade to 35% of Latin America’s GDP with member states:

• Chile
• Colombia
• Peru

5. The Mexico-Central American Free Trade Agreement

This FTA creates an economic zone and reduces tariffs for all of Central America, giving free-trade access to:

• Costa Rica
• Nicaragua
• El Salvador
• Guatemala
• Honduras

Other Bilateral Agreements

But it’s not just these major conventions and alliances that give manufacturers in Mexico such a leg up. The country also boasts a number of bilateral agreements with major nations of the world, which include:

6. Japan-Mexico Economic Partnership

Even though both countries are part of the CPTPP, this bilateral FTA adds another layer of cooperation between Mexico and Japan. It’s particularly beneficial for reducing barriers on agricultural and industrial products, though it includes quotas on items like vehicles.

7. Mexico-Colombia: This FTA focuses on agricultural trade and intellectual property.
8. Mexico-Chile: This longstanding deal removed most tariffs decades ago.
9. Mexico-Peru: This arrangement gradually phased out tariffs between the two countries since 2011.
10. The Mexico-Israel Free Trade Agreement: Since 2000, Mexico and Israel have been in alliance to give Israel access to the Mexico’s market and to facilitate Israel’s investment in several sectors like technology.
11. Mexico-Panama: This deal was ratified in 2015, and normalizes trade and methodologies for resolving disputes. 
12. Mexico-Bolivia: This trade deal is the second iteration of an early agreement between the two Latin American nations. It promotes free trade and fair competition between both countries.

Why FTAs Matter for Manufacturers

Mexico’s free trade agreements are about more than just lower tariffs. They create streamlined processes for importing raw materials, exporting finished goods, safeguarding intellectual property, and maximizing profitability. For businesses, this means:

• Cost Savings: Reduced or eliminated tariffs make products more competitive globally.
• Market Access: Companies can reach over 1.5 billion consumers in markets like Europe, Asia, and Latin America.
• Supply Chain Resilience: Sourcing materials from FTA partners keeps costs low and logistics efficient.

Even with the US occasionally hinting at tariffs on Mexican imports, the sheer number of free trade agreements Mexico has ensures its manufacturing base remains globally competitive. Businesses operating in Mexico don’t just gain access to the US; they tap into an entire world of opportunity for export manufacturing success.

For US companies looking to nearshore, Mexico’s FTAs are a golden ticket. By establishing operations in Mexico, these businesses can enjoy the benefits of affordable labor, geographic proximity, and unparalleled market access. And with a framework that includes robust protections for intellectual property and sustainable trade practices, Mexico isn’t just a cost-saving alternative—it’s a gateway to innovation and growth.

Today’s marketplace is complicated. Global supply chains are increasingly strained. And this has led to many US companies to re-evaluating their strategies. Mexican nearshoring, in particular, has emerged as a compelling alternative to traditional offshoring. 

In an era defined by geopolitical tensions, health crises, and disruptive technologies, nearshoring offers a unique blend of cost savings and logistical advantages, all while helping businesses become more resilient.

But what exactly is Mexican nearshoring, and is it the right move for your company? Let’s dive into the pros, cons, and key considerations before making the shift.

Just What Is Nearshoring?

Nearshoring refers to relocating business functions—often manufacturing—to a nearby country rather than one that’s oceans away. It’s essentially a more localized form of outsourcing. While offshoring has long been the go-to strategy for companies looking to lower costs (think outsourcing to China or other Asian countries), nearshoring brings operations much closer to home.

In the past, businesses flocked to Asia for its cheap labor and low production costs. But over the years, things have shifted. Global economic conditions, rising shipping costs, and unpredictable geopolitical situations have caused companies to rethink their offshore setups. Enter Mexican nearshoring.

By relocating operations to Mexico, businesses can maintain many of the benefits of offshoring—like affordable labor costs—while also reducing shipping time and gaining more control over their supply chains. But while the upsides are clear, there are also important challenges to consider.

The Pros of Mexican Nearshoring

So, why is Mexican nearshoring becoming such a popular choice? Here are some of the key benefits:

1. Lower Transit Times

Unlike offshoring to faraway locations like Asia, nearshoring to Mexico drastically reduces shipping times. Products made in Mexico can reach US distribution centers in just a few days, compared to the weeks it might take from China. This speed is crucial for companies looking to get products to market quickly.

2. Comparable Time Zones

The time zone difference between the US and Mexico is minimal, which makes communication and coordination much smoother. Teams in the US and Mexico can work on the same schedule, allowing for more efficient collaboration without the usual hurdles of a 12-hour time gap.

3. Greater Supply Chain Control

With manufacturing operations just across the border, Mexican nearshoring gives companies more oversight of their supply chain. You can quickly adjust production, respond to market shifts, and address issues as they arise—all with less risk of disruption.

4. More Flexibility

The proximity of Mexico allows for greater flexibility and scalability. You can ramp up or down based on market demand without the delays and complexity that often come with offshoring to distant locations.

5. Cost Effectiveness

Labor costs in Mexico remain rather competitive, and businesses can still take advantage of the country’s lower wages without sacrificing quality. Additionally, the reduced shipping time and proximity to the US market further enhance the cost-saving benefits.

6. Increased Cultural Compatibility

While cultural differences still exist, working with a neighboring country like Mexico makes cross-cultural communication easier than working with distant Asian suppliers. Shared borders often mean shared business practices, making collaboration smoother and less prone to misunderstandings.

7. More Favorable Tariffs

Thanks to agreements like the USMCA, manufacturing in Mexico often comes with reduced tariffs and other trade advantages, making it a more cost-effective option for US companies compared to offshoring to other regions.

The Cons of Mexican Nearshoring

Like any business decision, Mexican nearshoring isn’t without its challenges. While most companies who choose to manufacture in Mexico find the positives overwhelmingly outweigh the negatives, there are some hurdles companies might face when considering this strategy:

1. Potential Supply Chain Disruptions: Even with proximity, disruptions can still occur. Businesses need to have contingency plans and ensure they’re working with reliable partners.
2. Regulatory Compliance: Operating in a foreign country means navigating a different regulatory landscape. Mexico’s labor and environmental laws may differ significantly from those in the US, so manufacturers should take steps to streamline compliance in a foreign country. 
3. Cultural Differences: While the cultural gap is narrower than when working with distant countries, there are still important nuances to consider.
4. Transportation & Infrastructure: While Mexico’s infrastructure is generally reliable, challenges can arise at border crossings or in certain regions. Ensuring that transportation routes are optimized and that customs processes are efficient is key to maintaining supply chain integrity.

Steps to Make Nearshoring in Mexico Work for You

Now that you understand the pros and cons of nearshoring to Mexico, it’s time to think about how to implement it successfully. Here are a few tips to help you get started:

1. Define Your Goals

Before jumping into nearshoring, take the time to clarify what you want to achieve. Whether it’s reducing costs, improving supply chain agility, or gaining access to new markets, understanding your objectives will guide your decision-making process.

2. Choose Your Mode of Entry

There are multiple modes of entry for companies outsourcing to Mexico. From contract manufacturing to using a shelter partner, you have options that best fit your current needs. Get to know these different ways of accessing to Mexico.

3. Select the Right Location

Mexico offers a variety of manufacturing hubs, from border cities like Tijuana and Juarez to industrial centers further inland. Evaluate the location based on factors like labor availability, transportation links, and proximity to key markets.

4. Partner with the Right Providers

Once you’ve chosen a location, the next step is to find the right partners to help you navigate the process. Consider working with shelter service providers or experts who specialize in Mexican nearshoring. They can help you handle everything from regulatory compliance to facility setup, allowing you to focus on scaling your business.

5. Plan for Flexibility

The beauty of nearshoring is the flexibility it offers. Work with partners who can quickly scale your operations up or down depending on market conditions. This agility is crucial in today’s fast-paced global economy.

Mexican nearshoring offers a strong solution for companies looking to optimize their manufacturing strategies. With its lower transit times, cost-effective labor, and improved supply chain control, it’s no wonder more businesses are moving their operations to Mexico. However, like any strategic shift, nearshoring comes with its own set of challenges, from regulatory hurdles to infrastructure concerns. So, move strategically.

By understanding these benefits, challenges, and best practices, businesses can make informed decisions that set them up for long-term success. Whether you’re looking to enhance resilience, improve flexibility, or just save on shipping costs, nearshoring to Mexico could be the next step in building a more agile and competitive business.

On the campaign trail, Donald Trump promised to raise tariffs on foreign-made goods. And since winning the presidential election, he has threatened severe tariffs on America’s closest trade partners, Canada and Mexico. 

What risk do the proposed Trump tariffs pose to trade between Mexico and the United States? Will a Trump presidency actually achieve these high tariffs? And if so, what can we expect in the next several years of US-Mexico trade?

Trump Promises Tariffs on Mexico

Newly elected President Trump took to Truth Social the week after the election to promise tariff hikes on Mexico and Canada. He vowed that his very first day in office – January 20th – he will sign all the necessary paperwork to levy a 25% tariff via executive order.

Regardless of the fact that Mexico is a member of the USMCA (formerly NAFTA), which guarantees duty-free imports from Mexico on most goods, Trump claims all goods coming into the States from Mexico will be subject to 25% duties.

Trump also proposed a 10% increase in tariffs on China until the country stops allowing fentanyl to enter the United States. He maintained that the tariffs on Mexico and Canada would also remain in effect until they stop the flow of illegal immigrants and drugs into the country.

Mexico’s new president, Claudia Sheinbaum, responded to the Trump tariff threat by implying that Mexico is prepared to respond with equal tariffs on US-made goods. She also pointed out that there is a problem with US-made firearms being illegally smuggled into Mexico, with as much as 70% of firearms used by criminals being brought to Mexico illegally from the US. She underscored that the US and Mexico should work together to resolve these cross-border problems. 

Impact of Trump Tariffs on Trade

In addition to being a member of USMCA, Mexico is also the United States’ biggest trading partner. And it’s reciprocal. The US exports more to Mexico than any other country, and Mexico exports more to the US than any other country. 

A full 80% of exports made in Mexico are bound for US ports. As such, a 25% tariff could cripple the country, significantly depressing their export-driven economy. But it’s not only the Mexican economy that would suffer. Binational companies that have built the Mexican-US partnership into their business model like Ford and GM would also suffer from increased costs. In fact, the automotive and other industries would see a dramatic rise in the cost of doing business with the US.

• Cars, Trucks & Parts: The automotive manufacturing industry stands to suffer the most.
  
• Electronics: Electronic devices and components comprise a huge portion of US-Mexico trade, with $1 billion USD in phones and wireless devices alone being exported to the US annually.
  
• Industrial Equipment: Machinery and industrial equipment are heavily traded from Mexico, with their high level of precision and quality making Mexican-made products desirable in the US.
  
• Food & Drink: Agricultural products and alcoholic beverages are among Mexico’s top exports to the US.
  
• Furniture: Mexico exports around $9.4 billion USD annually in furniture and appliances.
  
• Medical Devices: Mexico supplies US hospitals and health centers with approximately $1.1 billion in medical instruments and devices every year.

Will Trump Succeed?

With the extensive damage to US-Mexican trade that a 25% tariff would bring about, it begs the question: will we actually see tariffs like this on Day 1 or in the near future? Is President Trump bluffing in order to get some concession out of Mexico, or are we about to see a trade war break out with our top trading partner? Just what does Trump’s second term hold for Mexican export manufacturing and trade?

Trump has already indicated that he wants a renegotiation of the USMCA. He was notoriously outspoken in his criticism of NAFTA when he first ran for president. And when he brokered its replacement in the USMCA during his first term, he insisted on a renegotiation clause. According to that clause, the option exists to renegotiate in 2026, and Trump has already stated he will exercise this option to improve the deal even more.

He could be angling for a redo of USMCA. Trump’s bellicose rhetoric and threats to trade partners in the past have done well by him in bringing these trade partners to the negotiation table. In fact, Trump’s threats of starting a trade war with China resulted in his brokering a trade deal with them soon after. And in this case, there’s another aim he may be shooting for.

In fact, he already stated it plainly in his threat for a 25% tariff on Mexico: reducing the flow of illegal drugs and immigrants.

As everyone is aware, thousands of people are pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before…This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!…and until such time that they do, it is time for them to pay a very big price!

– Donald Trump, Truth Social post

From this post to his social media platform, Truth Social, it would seem the reasoning behind the Trump Tariffs is pretty straightforward. The incoming president is seeking leverage over Mexico in the effort to curb illegal immigration and fentanyl crossing the border. 

It may well be that the tariff threat everyone is talking about right now and calculating the damage and repercussions of, will never actually come to into being. Certainly they could, and any serious talk about a 25% tax on goods from Mexico should be weighed.  

However, according to his own words, Trump is likely seeking to start a serious negotiation on measures the Mexican government can take to address migrant caravans and illegal drugs crossing the border. And the 25% tariff is just his opening offer.