Category: Uncategorized

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.

Mexico’s reputation as a prime manufacturing destination is well established by now. And it’s no surprise just why. The unique advantages of manufacturing in Mexico give it a clear lead among global outsource destinations.

The Latin American country’s unique strengths have propelled businesses manufacturing there far past their competition for decades. And today, those advantages are more relevant than ever.

From cost savings to streamlined logistics, Mexico offers a dynamic environment for companies manufacturing for export. Businesses are increasingly leaving Asia to “nearshore” just south of the border, and it’s easy to see why. Mexico has appealing offers unique to this country. 

Here’s a closer look at five of the most significant, standout benefits that make Mexico a manufacturing powerhouse.

1. Proximity That Boosts Agility

Being neighbors with Mexico gives US manufacturers a major leg up here. Manufacturing in Asia just can’t keep up. The close geographical ties mean reduced shipping times, faster supply chain responses, and seamless communication and management.

Forget late-night calls to factories across the globe—Mexican operations sync with US business hours and time zones. Oversight is easier, too; a quick flight (or even a drive) can put managers on the ground at Mexican factories to keep things moving smoothly.

And shipping times are measured in days, not weeks. This allows businesses to maintain leaner inventories and respond to demand shifts on a dime. In an era where agility is king, Mexico reigns.

2. Low-Cost, Highly Skilled Labor

When it comes to labor costs, Mexico hits the sweet spot—affordable but packed with expertise. While wages in China have soared in recent years, Mexico’s remain stable and predictable. Today, the average manufacturing wage in Mexico hovers around $3/hour, compared to about $25/hour in the US.

But it’s not just about cost; it’s about quality. Mexico’s education system works hand-in-hand with industry to produce a steady stream of skilled workers. The result? A deep talent pool ready to tackle complex manufacturing needs, from assembly to advanced engineering.

Managing a maquiladora (factory) in Mexico also brings savings in taxes, shipping, and startup costs. It’s a win-win for companies looking to trim expenses without sacrificing quality.

3. World-Class Infrastructure

The advantages of manufacturing in Mexico extend beyond its location. It’s also just built for business. The country boasts a robust infrastructure designed to support everything from simple assembly to high-tech manufacturing.

Extensive rail networks, modern highways, and world-class air and sea ports ensure efficient transport of goods. Industrial parks, many with cutting-edge facilities, provide safe, collaborative environments for production.

Telecommunications are equally strong. High-speed internet and dependable electricity in major industrial areas mean operations can run as smoothly as they would in the US.

4. Ironclad Intellectual Property Protections

When outsourcing manufacturing, safeguarding intellectual property (IP) is a top priority. In Mexico, companies can rest easy knowing their innovations are protected by one of the strongest IP frameworks in the world.

Mexico’s commitment to IP stretches back to the 19th century. And today it’s codified in the Federal Law for Protection of Industrial Property. Thanks to updates aligned with USMCA and other international treaties, businesses enjoy protections like:

• Patent privileges for new substances and components
• Trade secret violation enforcement with damage claims
• Protections against bad-faith trademark applications

This robust legal framework ensures your ideas and innovations stay yours.

5. Unmatched Free Trade Access

Mexico isn’t just great for manufacturing—it’s a gateway to the global market. With 14 free trade agreements spanning over 50 countries, Mexico opens the door to duty-free or reduced-tariff exports that reach 60% of the world’s GDP.

The US-Mexico-Canada Agreement (USMCA) makes exporting to the US and Canada seamless, but Mexico’s reach goes far beyond North America. With agreements in Europe, Latin America, and Asia-Pacific, goods made in Mexico enjoy preferential access to major markets worldwide.

For businesses, this means reduced costs, expanded opportunities, and a competitive edge on the global stage.

Why Mexico Stands Out

The advantages of manufacturing in Mexico go beyond these five unique benefits. From streamlined operations to tax breaks and reduced shipment costs, the country offers a comprehensive solution for manufacturers looking to stay competitive in many key export areas.

And in an increasingly globalized and demanding market, it’s not hard to see why Mexico stands out. As a destination that combines cost efficiency, skilled labor, and strategic location, Mexico offers what many destinations cannot. For global leaders and emerging players alike, Mexico’s advantages elevate export manufacturing and provide the strategic advantage necessary in our modern world. 

Made in Mexico is a phrase seen more and more on products in the US and around the world. The Latin American country has been steadily growing their market share of the global economy for decades and using manufacturing as a primary driver for this growth. 

Exports are on the rise in Mexico, as is the interest in doing business there. Foreign companies seek to outsource manufacturing to take advantage of a cost-effective labor pool and free-trade access to most major global markets. 

So, just what exactly is made in Mexico? What are Mexico’s specialties? And what products does this growing country export to trade partners the most? Read on, because that’s precisely what we’re about to discuss.

Mexican Manufacturing for Export

With nearshoring on the rise, it’s clear that global manufacturers are choosing Mexico in ever increasing numbers. And the appeal is pretty easy to figure out. Mexico offers clear advantages over other destinations when it comes to manufacturing for export. With state-of-the-art industrial parks, cutting edge telecommunications, aggressive infrastructure investment, and more free-trade partners than any other country, Mexico’s industrial regions are locations where manufacturing thrives.  

But it’s not just cheap labor and free trade driving export manufacturing success. The country is also keen on an educated workforce for those manufacturing jobs requiring more sophisticated skills and operations. Mexico’s universities and trade schools partner with industry to produce engineers and skilled labor to fill the specific roles that manufacturing demands. 

As a result, this highly affordable, highly skilled workforce produces quality manufactured goods for several key export industries. Last year, Mexico exported around $593 billion USD worth of products, up from about $460 billion in 2019. Mexico is the top trade partner for the US, but many other countries do business with Mexico as well. While the US imports nearly 80% of Mexico’s exports, Canada, Germany, Brazil, and many Asian countries (including China) also buy exports made in Mexico.

Made in Mexico

Now, let’s look at just what Mexico exports. While Mexico exports products in many industries, there are several that stand out as clear leaders in the country’s economy.

• Vehicles

Automotive manufacturing is Mexico’s most active source of exports. In fact, vehicles account for over 26% of all exports made in Mexico at around $156 billion USD. In 2005, Mexico made and sold over a million passenger vehicles.

As the 2nd largest automotive manufacture in the world, most leading automotive brands in the world do business there, including BMW, Audi, Ford, GM, Honda, and others. And as long as 70-75% of the vehicle’s content originates in North America, these companies can export vehicles made in Mexico to the US and Canada duty free.

• Electrical

Electrical machinery and equipment are one of the primary sources of Mexican exports, totaling about $103 billion in 2023. Computers and other machinery accounted for another $90 billion. And really, electronics manufacturing in Mexico goes all the way back to the 1960s. The sector has grown since then and now encompasses many areas, from consumers electronics to automotive electronics, medical equipment, computing, and more. The electronics industry accounts for 2.5% of Mexico’s total gross domestic product.

• Medical

Medical devices and related exports are expected to reach an annual average value of $15 billion USD in the near future.  Mexico is already the 7th largest medical devices exporter in the world and exports products to 135 countries globally. Key medical brands like Johnson & Johnson, Medtronic, GEM, and Integer depend heavily on products made in Mexico to propel their global success.

• Plastics 

Plastics and plastic articles are manufactured extensively in Mexico and account for nearly $12 billion in annual exports. With over 4,000 companies, plastics manufacturing in Mexico is a vibrant export sector. 

Mexico actively makes materials and parts like PVC, acrylic materials, and PP film, as well as plastic resins, capital equipment, and recycled goods. In fact, 50% of plastic resins produced in Mexico are PET, PVC, or HDPE.

• Metals

Mineral and metal products exported from Mexico total nearly $80 billion USD per year. Mexico’s wealth of natural resources makes it a major exporter of minerals and metals. Mexico is the world’s largest producer of silver, which is used extensively in the construction and electronics industries. Mexico also makes refined metal products like steel for use in automotive, aerospace, and construction applications.

As an industrious nation, rich in natural resources, economic opportunity, and a vision for the future, Mexico has many export industries on the rise. These are only some of their biggest and most active. 

And as the shift from global supply chains to regional and more resilient operations comes full circle, the country’s advantages will become clearer. Manufacturing for export there will become even more profitable. And more and more products we use every day will come with the stamp, Made in Mexico. 

Perhaps you’ve heard of all the companies relocating to Mexico and want to understand how to access Mexican manufacturing for your own business. Maybe you’ve considered outsourcing to Mexico in the past and want to know if now is the time. Or it could be you just want to know more about shelter manufacturing and what makes it such an attractive option for manufacturing.

Whatever brought you here, if you’re exploring options to scale your production while keeping costs manageable, shelter manufacturing in Mexico might just be the solution you need. For manufacturers eager to tap into Mexico’s skilled workforce, strategic location, and cost advantages, shelter services provide a streamlined, low-risk way to enter the market. 

Here’s everything you need to know about what shelter services entail, how they work, and why they’re such a powerful option for companies looking to access Mexican manufacturing with minimal setup hurdles.

What is a Shelter Service?

In brief, shelter manufacturing in Mexico is a partnership model that lets you operate in Mexico under a third-party’s legal entity. 

This means you sidestep setting up your own entity, saving time, money, and administrative hassle. Shelter companies take on the heavy lifting—handling compliance, HR, payroll, and even certain logistics—so you’re free to focus on your core production goals. You still control your manufacturing processes and product quality, while the shelter company provides the infrastructure and legal cover to make it all happen smoothly.

The IMMEX program, exclusive to Mexico, further enhances these benefits by offering VAT exemptions on temporarily imported materials, machinery, and parts. This special status alone can speed up production timelines and ease the regulatory load, letting you gain immediate access to Mexican manufacturing without drowning in red tape.

Benefits of Shelter Manufacturing

Opting for a shelter manufacturing service brings some serious advantages:

• Speedy Market Entry: Forget months of setup; with a shelter, you can get production rolling in a matter of weeks.
  
• Cost Savings: Mexico’s labor costs are significantly lower than in the U.S., and the IMMEX program’s VAT exemption cuts costs further.
  
• Risk Mitigation: With the shelter service handling legal and regulatory compliance, you avoid the typical risks that come with establishing a foreign operation.
  
• Operational Control: While the shelter manages the administrative side, you retain control over the production, quality, and process standards.
  

This approach offers flexibility for businesses of various sizes, but it’s particularly suited for companies seeking high-volume production without the commitment of full ownership.

How Shelter Manufacturing Works

Shelter manufacturing starts with finding a reputable shelter provider. You provide details on your production needs—such as volume, timelines, and quality standards. The shelter provider then sets up a plan, sourcing materials, overseeing production, and managing supply chain logistics. Throughout the process, you’ll have direct lines of communication, allowing you to monitor progress and address issues as needed.

The shelter service provider essentially becomes your local arm in Mexico, handling day-to-day operations and regulatory challenges. By the time your goods are ready, the shelter company manages export logistics, ensuring they reach your US base or other destinations seamlessly. Starting out on your Mexican outsource journey is an important step to get right, and a shelter service ensures you nail it.

Getting Started: Key Considerations

When you’re ready to explore shelter manufacturing, here are four essentials to keep in mind:

1. Choose the Right Shelter Partner: Not all shelter companies are created equal. Look for one with a strong track record, IMMEX certification, and a reputation for quality and reliability. This will save time, hassle, and potentially costly missteps.
2. Know Your Production Requirements: Clarity is key. Before jumping in, define your production goals—whether it’s volume, lead time, or specific quality standards. Clear requirements make it easier for the shelter provider to meet your expectations.
3. Prioritize Communication: Effective communication from day one is critical for success. Establish clear communication channels with the shelter team to ensure alignment and swift issue resolution.
4. Be Mindful of Cultural Differences: Working in a new country involves adjusting to a different business culture. Taking time to understand and respect Mexico’s work culture can go a long way in fostering strong relationships with your local workforce and partners.

Why Mexico? The Unique Advantages

Maybe you’re still not clear on why Mexico is the place to setup an outsource operation. You may want to access Mexican manufacturing, but are still considering Asia for their low wages. Here are some unique advantages about Mexico you should understand.

Mexico’s appeal for manufacturing goes beyond low wages. Skilled labor, favorable trade agreements, and the proximity to North American markets also make it a strategic choice. Free trade agreements with over 50 countries mean lower tariffs and faster transit times for goods. Additionally, access to an experienced manufacturing workforce means you’re not just saving money—you’re also tapping into a talent pool that can meet specialized production needs.

But while shelter manufacturing is ideal for many companies, it’s not the only option for entering the Mexican market. Here’s a quick comparison of other manufacturing entry methods you might also consider:

• Contract Manufacturing: Ideal for simpler production needs, contract manufacturing allows you to partner with an established facility in Mexico that manages production for you. While this is cost-effective, it sacrifices control, making it less suitable if quality or IP protection is a priority.
• Standalone Factory: Companies looking for maximum independence might consider setting up their own maquiladora (factory) in Mexico. This offers full control over operations and can lead to long-term savings but requires a higher upfront investment, time, and regulatory navigation.

For businesses seeking a balance of control, flexibility, and reduced risk, shelter manufacturing stands out. It combines the ease of entry with cost savings and operational control, making it an ideal choice for many manufacturers seeking to access Mexican manufacturing seamlessly and profitably.

Unlocking the Full Potential of Shelter Manufacturing

Shelter manufacturing in Mexico offers a dynamic path forward for US companies. With its built-in compliance support, risk mitigation, and significant cost advantages, shelter manufacturing removes common obstacles and brings Mexico’s manufacturing benefits within reach.

By choosing shelter services, your business can ramp up production in weeks rather than months, keep administrative burdens low, and focus on building a strong foothold in the global market. So, if you’re looking to expand into Mexico, start by evaluating shelter manufacturing. It’s a shortcut to savings, operational efficiency, and streamlined success.

Last week, Donald Trump defied the odds and was elected to a second term in the White House. After sparking a trade war with China and renegotiating NAFTA in his first term, a second Trump term may likewise generate significant impact on manufacturing.

Already, industry in the US and around the world is leaning in to learn how the incoming administration will act on international trade and manufacturing. A second Trump term is expected to be similar in some ways to the first term, but perhaps bolder and more aggressive. And certainly, signals from the Trump people have confirmed these expectations.

Donald Trump promised on the campaign trail to raise tariffs, bring manufacturing back to the United States, and renegotiate his trade deal, the USMCA. His brand of protectionism stands in stark contrast to the globalism of previous decades, and it has manufacturing sitting up and paying attention.

But just what are Trump’s plans for industry and international trade? How will this incoming Trump term impact manufacturing?

Less Trade with China

In his first term, Donald Trump implemented a 25% tariff on $200 billion USD in goods imported from China. Later he threatened to apply these high tariffs to another $325 billion of China’s exported goods. When he also placed a 10% tariff on steel and aluminum, China responded by raising tariffs on $3 billion of US steel and aluminum exports. But, before Trump’s additional 25% tariffs went into effect, China’s government negotiated an agreement with the Trump administration to delay the hikes indefinitely. 

If Trump’s first trade war with China is any indication, a second Trump term will likely see more tariffs on Chinese goods, resulting in less trade with the country. Already, Mexico has surpassed both China and Canada as the top US trading partner. Due to tariffs that targeted China in response to what Trump said was an unacceptable trade deficit, trade with China has become more expensive. And manufacturers have begun looking elsewhere, considering nearshoring options like Mexico, instead.

Protectionist Tariffs

But it’s not just China that will potentially see higher tariffs. When Trump takes office in January, he is expected to make protectionist tariffs a priority. He has long promised to bring manufacturing back to the states by raising tariffs on internationally manufactured goods, and it seems high up on his list of priorities. 

He has promised 10% tariffs on all imported goods across the board. He has discussed even higher tariffs on China and Mexico, but details here are fuzzy. Currently, goods manufactured in Mexico for export to the US are duty-free by international treaty. And China has already begun to respond to the shifting trend, setting up factories in Mexico for export to the US. This loophole is likely to be addressed during Trump’s second term. 

More Automotive Manufacturing in the US

A key supporter of Donald Trump’s second campaign was Elon Musk, founder and owner of Tesla, the leading US EV manufacturer. Musk is poised to invest significantly in further US-based automotive manufacturing, and Trump’s focus on bringing this industry back to the US may be bolstered by this partnership. 

In all likelihood, the next four years will probably see more automotive manufacturing in the United States due to tariffs overall, but also due to targeted tariffs likely to be placed on automobiles manufactured abroad. Automotive manufacturing states like Michigan were crucial in bringing about a second Trump term, and President Trump is expected to revitalize these clusters in the US. He is also expected to reverse the Biden Administration’s light-duty vehicle emissions standards, sometimes referred to as the EV mandate.

Less Globalization

In this push for reshoring manufacturing to the US, North America at large will likely see a rise in manufacturing. Mexico, Canada, and the US already form a tightly-knit, cohesive and dynamic manufacturing unit. This unit competes, not among member countries, but with other global regions.

This phenomenon is sometimes called regionalism and stands in contrast to globalism. Once the dominant trend, globalization is being replaced. Regionalism stands out as a more resilient and sustainable model for international manufacturing. And this second Trump administration may view this trend as a good thing for the America-first cause. 

Renegotiation of USMCA

While NAFTA set off a wave of free trade and globalism, Trump renegotiated the landmark free trade agreement in his first term and renamed it, the USMCA. One of the main differences between NAFTA and the USMCA was a provision requiring review and amendment every six years. The treaty is due for review in 2026, during Trump’s second term. 

Trump has already stated that he wants to exercise this renegotiation clause to make a better deal, especially regarding the China-in-Mexico loophole and the automotive industry. The goal is to bring more manufacturing to the US without losing Mexico as a valuable trade partner. But allowing China to piggyback on this deal is a concern for an incoming Trump administration.

There are two months remaining before Trump’s second term begins. But already, there are supply-chain concerns in the manufacturing industry that new tariffs on inputs will increase the cost of manufacturing in the US. Many manufacturers are frontloading shipments in order to get them into the country prior to Trump’s inauguration in January of 2025. While this urgency may prove to be uncalled for, shipping stocks have already begun to decline on fears that trans-oceanic trade will diminish long-term.

Whatever policies this second Trump term actually produces, manufacturers in the US are watching for another round of international negotiations, a possible trade war, long-term growth in North America, and maybe a surprise or two along the way. 

As an agricultural giant, Mexico grows a lot of food. But their domestic consumption habits have been shifting in recent decades, as is true of most developed nations. But incoming President Sheinbaum has a new vision. She wants to go back to the 1980s in a return to the basics. 

As such, the new Mexican agriculture plan is set to change the way Mexican farmers and food producers do business. What this may look like for the domestic market and Mexico’s substantial export market is anyone’s guess. But big changes are coming. And that’s what we’re about to explore.

Mexican Agriculture

Many people know that Mexico is a manufacturing giant. Their manufactured exports help make Mexico the top US trading partner. But what many do not realize is that a large percentage of that trade comes in the form of agricultural products. Indeed, Mexican agriculture is one of the country’s largest industries, employing millions of workers and contributing billions of dollars in export revenue. 

• Mexico is the world’s largest exporter of avocados.
• Mexico is the world’s largest producer of limes.
• Mexico is the world’s largest producer of chilies.
• Mexico is the world’s largest exporter of fresh tomatoes.
• As the world’s second-largest producer of organic coffee, the crop is grown in several Mexican states.
• Mexico is one of the world’s major producers of mangos, corn, tequila, papaya, bananas, and others.
• Mexico is the birthplace of chocolate and a major exporter of cacao.

Mexico’s agricultural sector is diverse and highly active on the international scene. Farming and agriculture employ approximately 13% of the nation’s workforce, making it a huge economic driver. And with a rich agricultural tradition going back thousands of years, farming is also part of the Mexican culture and identity. As such, the country is serious about remaining a global leader in this sector for many years to come.

The New Plan

Mexico’s recent election made Claudia Sheinbaum the country’s next president. And when she took office on October 1st, she brought with her a love for the nostalgic ways of Mexico prior to the 21st century. And one of her priorities has been to return the way Mexicans eat and grow food back to the more traditional methods and diet of decades past. 

In fact, some have said of the new Mexican agriculture plan that it aims to return Mexico’s food and agriculture to the 1980s. Back then, Mexicans ate far more beans and tortillas and other basic agricultural products. This stands in contrast to the more modernized landscape of Mexico’s diet, which includes far more packaged foods, snack foods, and imported goods.

In fact, much of what Sheinbaum is pushing for is food sovereignty. “It’s about producing what we eat,” she said, when announcing her new policy initiative. She went on to summarize it by stating, “It is much better to eat a bean taco than a bag of potato chips.”

And bean tacos are just the beginning. The government’s new plan aims to increase domestic production of beans by 30% in the next six years. Mexico currently imports a lot of the beans they eat, and Sheinbaum wants to change that. Her plan even seeks to establish research centers to supply higher yielding bean seeds to farmers.

A cornerstone of the new Mexican agriculture plan is also the revamping of Mexico’s government food stores. Back in the 1980s, Mexicans bought much of their ingredients – foods like beans, instant coffee, cheap cocoa, and tortillas – at government-owned and government-subsidized stores.  Sheinbaum aims to bring these stores back, along with the cheaper prices for basic, more traditional foods and ingredients.

This is in combination with a newly announced ban on school sales of “junk food” – including salty or fried, processed snacks, sweetened beverages, and soft drinks. And this Mexico-centric focus mirrors Mexico’s goals of switching to renewable energy and energy sovereignty. Mexico wants more of Mexico for Mexicans. 

Criticisms

But the new Mexican agriculture plan isn’t without its critics. While banning junk food sounds good, other forms of prohibition have only increased Mexicans’ desire to consume those forbidden things. For example, in spite of a ten-year-old ban on advertising junk food to children, Mexican juveniles continue to consume alarming amounts of Coca-Cola.

And while Sheinbaum longs for a return to when Mexicans drank cheap, instant coffee, more Mexicans are switching to the premium varieties grown right there in their own country – a form of food sovereignty she might not have intended. Perhaps as a result of declining poverty, Mexicans are developing a taste for higher-end coffee.

Likewise, Mexico is known for cocoa, but not the fine bars of chocolate the rest of the developed world enjoys. They primarily consume cocoa in hot beverages and export raw cacao for refinement elsewhere. And those exports have dropped off dramatically since the 1980s, due to plant diseases and waning investment. So, how will Sheinbaum’s new plan reverse this trend?

Likewise, Mexicans don’t eat as many beans as they used to, with some estimating the amount of beans Mexicans consume annually at half what they consumed in 1980. How will she turn this long-term trend around?

Nevertheless, with new policies in place to reduce the price of tortillas by 10%, increase production of beans by 30%, and bring back government subsidies of certain foods, Mexico’s agricultural landscape is set to change in the near future. Perhaps a little, perhaps a lot. But while this may not be as dramatic a shift as intended, there will likely be a renewed emphasis on those agricultural products Mexico is known for: corn, beans, cocoa, etc. 

And these changes will likely impact domestic markets far more than Mexico’s export markets. But those who sell agricultural products to Mexico may also notice a shift in demand trends. It really just depends on Mexico’s appetite for change.

Long overlooked as underdeveloped, poverty-stricken, and limited, Mexico is turning things around. In fact, poverty in Mexico continues to fall, in response to strategic policies and plans to transform the Latin American country into an industrial powerhouse.

While much of the world looks to Asia to manufacture its goods, forward-looking companies have noticed the numerous reasons to outsource to Mexico. As a result, the extreme poverty often associated with the majority of Mexico is slipping. New numbers reveal that, in spite of lingering problems and deeply seated challenges, the country has a brighter future.

Mexico’s War with Poverty

Mexico has been making impressive strides in its battle against poverty. Over the last several years, the country has witnessed a significant drop in its poverty rate, falling from approximately 50% of the population in 2018 to 43.5%, according to a 2023 study by Coneval, the nation’s poverty analysis agency. This translates to 5.7 million fewer people living below the income threshold needed for basic needs like food and clothing.

And why is poverty in Mexico declining? Mexico’s success in reducing poverty is largely credited to two key factors: 

• Rising remittances
• Increase in minimum wage

The remittances, money sent home by Mexicans working abroad, have almost doubled since 2018, growing from $33.5 billion to an estimated $60 billion in 2023. Much of this money goes directly to the country’s poorest families, helping them cover essentials and stay afloat.

Mexico’s minimum wage has also risen substantially, from about $4.50 a day in 2018 to roughly $12 in 2023. While still a relatively low cost of labor, this boost, along with the appreciation of the Mexican peso, has enhanced the purchasing power of millions. This further contributes to the nation’s economic growth. And as a result, more Mexicans are now able to access better education and healthcare, lifting their families out of poverty, and driving down the overall rate of poverty in Mexico.

Remittances, meanwhile, continue to play a pivotal role in boosting financial security for many lower-income households. For the poorest families, this influx of money is often a lifeline, helping them manage everyday expenses and prevent further financial hardship.

Challenges Remain

Despite these positive trends, challenges persist. Coneval’s report highlighted that extreme poverty — defined as those unable to afford basic food needs — slightly increased from 7% in 2018 to 7.1%. 

Additionally, healthcare-related financial burdens have increased. The percentage of people reporting money problems related to medical costs grew, likely due to both the ongoing restructuring of Mexico’s healthcare system and the lingering effects of the COVID-19 crisis.

During the course of his tenure, López Obrador’s administration had introduced various social programs aimed at alleviating poverty, including pensions for people over 65 and apprenticeships for young people. However, these initiatives are not means-tested, meaning they are available to all who qualify, regardless of income. As a result, it’s unclear how much they’ve benefited Mexico’s poorest populations specifically.

Still, Mexico’s broader economic and pro-manufacturing policies have helped foster growth and improve conditions for millions of citizens. The expansion of social mobility, alongside the increased purchasing power of workers, have driven consumer demand and strengthened the country’s economy.

A Long Road Ahead

Reducing poverty in Mexico is part of a larger, ongoing economic strategy. While extreme poverty remains a pressing issue, the overall decline in Mexico’s poverty rate suggests progress. The country’s push for sustainable development, coupled with increased foreign investment, offers hope for continued growth. The Mexican labor force — seen as key to future success — remains competitive, especially in the manufacturing sector.

Though the journey is far from over, Mexico’s fight against poverty is gaining ground. As remittances continue to flow in, wages rise, and economic conditions improve, there’s reason to believe the country can continue reducing poverty and building a more prosperous future for all its citizens and those businesses creating opportunities there.

When companies decide to outsource to Mexico, choosing the right entry method is key to success. There are multiple modes of entry to manufacture in Mexico, and there’s no one-size-fits-all approach.  Each mode of entry brings unique benefits and challenges. 

The choice you make impacts everything from costs and control to risk tolerance and timelines. It is absolutely essential that you understand the primary ways to manufacture in Mexico so you can choose the one that best suits your company’s situation. Here’s a look at three most popular and successful popular ways to enter the Mexican manufacturing market and how they stack up.

1. IMMEX Shelter Provider

A favored choice for many foreign manufacturers, working with an IMMEX shelter provider offers fast and efficient entry into Mexico’s manufacturing sector. The IMMEX program is unique to Mexico, providing foreign manufacturers with significant savings in cost, time, and compliance headaches.

The main advantage of a shelter provider is that the foreign company doesn’t need to set up its own legal entity. The shelter service holds the necessary permits, including IMMEX registration and VAT certification, which saves months of bureaucratic delays. This VAT certification exempts you from the 16% value-added tax on temporarily imported materials, goods, and machinery. In short, you hit the ground running, with minimal red tape.

A shelter service also takes care of all the local administrative tasks—hiring, payroll, tax compliance, legal matters—leaving you free to focus on production. You maintain full control over your product and operations, while the shelter provider handles the local complexities. This makes shelter manufacturing a great option for companies looking to save time and minimize risks while getting production up and running quickly.

For businesses aiming to streamline their entry into Mexico with minimal upfront investment, a shelter provider is often the best route.

Pros:

• Speedy startup (weeks instead of months)
• No need to set up a separate entity
• VAT tax exemptions
• Complete operational control
• Reduced legal and tax risks

Cons:

• May not be as beneficial for companies with fewer than 20 or more than 500 employees.
• Doesn’t leverage current company capital.

2. Contract Manufacturing

Probably the most popular of the modes of entry to manufacture in Mexico – especially among smaller or less committed companies – is contract manufacturing. This method involves partnering with an established manufacturer in Mexico who handles production on your behalf. This is ideal if you don’t want the commitment of building or managing your own facility but still want to tap into Mexico’s manufacturing benefits.

Contract manufacturing can be particularly beneficial for companies with straightforward production needs—think injection molding or metal stamping. Your partner takes care of the factory operations, allowing you to scale production quickly. However, there’s a trade-off: you give up some control over quality and production processes, which can be a sticking point if protecting your intellectual property is a priority. 

If you prioritize speed and cost efficiency, but don’t mind relinquishing some oversight, contract manufacturing might be a good fit.

Pros:

• Fast startup
• Low upfront capital investment
• Ideal for companies with predictable, high-volume production needs

Cons:

• Less control over manufacturing processes
• Potential intellectual property risks
• Limited flexibility

3. Standalone Factory

For those who prefer maximum control and independence, opening a standalone maquila factory in Mexico might be the best choice. Known as a maquiladora, this type of factory allows you to fully own and manage your production operation in Mexico, reaping the benefits of lower labor costs and tariff-free trade agreements. You import raw materials, oversee all factory operations, and export finished goods, all under your own brand’s umbrella.

The upside? Total control over every aspect of production, from quality assurance to intellectual property. But the downside is the complexity and time required to set up. You’ll need to handle everything—legal paperwork, labor laws, and compliance with Mexican regulations. Startup times can stretch into months as you establish your entity and deal with the learning curve of a new country.

This option is perfect for companies looking for long-term investment and maximum oversight, though it requires more upfront effort and financial commitment.

Pros:

• Full control over manufacturing and processes
• Better protection of intellectual property
• Long-term savings

Cons:

• Steeper learning curve
• Higher startup costs
• Longer setup time (months or years)
• Full responsibility for regulatory compliance

Making the Right Choice

Each of these three entry modes of entry to manufacture in Mexico – IMMEX shelter provider, contract manufacturing, or a standalone factory – has its own strengths and weaknesses. Your decision depends on your company’s size, product complexity, timeline, and risk tolerance. 

A shelter provider offers a fast and low-risk way to break into the market. Contract manufacturing is a great option for those seeking efficiency without full ownership. And a standalone entity is ideal for those seeking complete control, even if it takes longer to get started.

Whichever path you choose, Mexico’s manufacturing sector offers numerous advantages, from cost savings to proximity to key markets. Just be sure to match the method with your company’s goals for the best possible outcome.

Thousands of dockworkers are on strike this week to protest contract provisions they deem unacceptable. Talks between their labor union and the company that contracts with them fell through in the 11th hour, and now the historic port strike is set to halt about half of US container traffic and bring about major disruptions to the US supply chain.

What caused the strike? What are the prospects of resolving it quickly? And what are the impacts we can expect on the US economy, production, and supply chain from this significant walk-off? These are the questions on everyone’s mind right now. And in this article, we’ll explore just what is happening and why, and take a look at what the supply chain will look like as a result.

The Port Strike Begins

At 12:01 AM on October 1, nearly 50,000 longshoremen and dockworkers from Maine all the way down to Texas walked off the job. These members of the International Longshoremen’s Association (ILA) began picketing after months of negotiations fell through over details of a new contract with the US Maritime Alliance (USMX). 

This is the first time in almost 50 years this labor union has picketed. The last time was back in 1977, and it lasted a full 45 days. This one is four days old, and has shut down approximately 50% of all US container traffic, affecting ports down the entire Eastern Seaboard as well as the Gulf Coast. 

The ILA was created over a hundred years ago in the Great Lakes region and really became a major force after its ranks swelled in response to a 1934 strike in which 12,000 longshoremen (35,000 maritime workers in total) picketed for 83 days on the West Coast.

Port Strike Negotiations

Ultimately, the port strike comes down to two demands: much higher wages, and a hard ban on automation. 

As with most strikes, like last year’s autoworkers strike, money is a big factor. But the ILA isn’t asking for 20% or 30% salary increases like the autoworkers were. They want much more. Apparently in an effort to align East Coast wages with their West Coast counterparts, union workers are demanding annual raises of $5 per hour each year for six years straight. This represents a total raise of nearly double what the new contract already offered. 

USMX already offered starting wages for the first year at $20 an hour up to $39 an hour for workers with six or more years. But the port strike was launched because the USMX rejected a proposal to start workers at $44 per hour for the first year up to $69 in year six. The union argues that many of their workers are handling multi-million-dollar equipment, and that this qualifies them for nearly 100% over what they’re currently making. Hours before the midnight deadline, USMX increased their offer from 40% to a 50% raise, but the ILA rejected that offer. 

The second demand is what can only be described as a ban on automation. Ports are increasingly turning to cranes and driverless trucks to load and unload container ships in an attempt to reduce the number of humans needed. The Longshoremen’s union demands this be completely shut down. While there is already language to cap this reliance on automation in the proposed contract, the ILA wants “airtight” language that the ports won’t introduce automation “or semi-automation.” 

In other words, they want an all-out automation ban.

Repercussions from the Port Strike

Without a doubt, shutting down every single container port on the Eastern Seaboard and Gulf Coast is causing massive repercussions to the US supply chain. Already, reports are coming in that consumers are panic-buying toilet paper and paper towels. However, this is probably just a throwback to the COVID days, as these products will not be affected by the port strike. 

But shortages and higher prices are certainly coming for a number of other items. Perishable items that are imported are an obvious risk – things like bananas, cocoa, seafood, and pharmaceuticals. But others are also likely to see price surges, such as electronics, cars, machinery parts, and alcohol.

On the low end, some are estimating that a week-long port strike would cost the US economy $2.4 billion USD. But other economists are estimating the strike will wind up costing the US economy up to $5 billion USD per day. And we’re already four days into it. As the near miss with the rail workers strike in 2022 demonstrated, the potential for multi-layered harm to the supply chain is significant with any large-scale strike.

The primary effect will be port congestion on the West Coast, as shipments are re-routed.  Shippers will be forced to seek out alternative ports like Mexico’s Port of Ensenada to alleviate the congestion. 

Also, the added transportation costs and time will factor into calculating backlog and price hikes. And as the dockworkers continue their protest, the backlog could worsen, even impacting Black Friday and the upcoming holiday shopping season. 

Future Prospects

No one knows how long this port strike will last. But the longshoremen have made it clear they’re prepared to strike for as long as it takes to have their demands met. A compromise usually means the two sides meet somewhere near the middle. But an objective observer would likely conclude that negotiations met middle ground during the final hours before the strike, and the dockworkers rejected the compromise.

President Biden, on his way to visit the areas devastated by Hurricane Helene, called for the two sides to resume negotiations and avert what he called a “man-made disaster.” He called on the companies that control the ports to consider how incredible their recent profits have been and consider giving up more to end the stalemate. 

Naturally, Biden does not want to alienate union workers by invoking the Taft-Hartley Act, which would force workers to end the strike. And he has stated he will not do so. But neither does he want to see prices soar just before the national election. All the pressures are in place to resolve this crisis quickly. But as of yet, a solution seems elusive.