Many Mexican business leaders assert that their companies are positioned to thrive during another Trump administration. So long as he proceeds with his promise to increase tariffs on Chinese imports, that will amplify the need for alternative places to manufacture goods.
“Trump hates China more than he hates Mexico,” said Isaac Presburger, whose family apparel business outside Mexico City has long exported to the US. “This is a huge opportunity.”
‘Trump hates China more than he hates Mexico. This is a huge opportunity.’
Mexican businessman Isaac Presburger
For now, uncertainty reigns. Mazda, a Japanese car maker, is holding off on future investments in Mexico until Trump’s plans take shape. Honda has told investors that tariffs on Mexican-made vehicles could force it to consider shifting production elsewhere.
“If I was a member of a corporate board or a CEO, I’d think hard right now about investing in Mexico until you get more clarity,” said Shannon K. O’Neil, a Latin America expert at the Council on Foreign Relations in New York.
The “nearshoring boom” has been bountiful in Monterrey, a metropolis of more than 5 million people sprawling across a desert valley framed by the jagged peaks of the Sierra Madre. The capital of Nuevo Leon state, Monterrey lies within three hours of the US border by truck. It has a reputation for relative security along with luxurious hotels and restaurants. That combination has attracted foreign investment.
Pallets of compressor cases at a factory that makes air-conditioning units for the American company Trane, outside Monterrey.Credit: NYT
Over the first 11 months of this year, nearly $US23 billion ($36 billion) in foreign investment was committed to more than 100 projects, according to the state government. Swedish company, Volvo recently began erecting a truck factory. John Deere is building a plant to make construction equipment.
On a recent evening, Emmanuel Loo, Nuevo Leon’s economy secretary, held court at an outdoor restaurant, serving tacos to a pair of consultants — one a former executive at Intel, the American computer chip manufacturer. Loo had retained them to attract investment that could make the state a hub for the semiconductor industry.
He expressed confidence that the Trump administration would not disrupt those plans. He said he had taken assurances from meeting with Donald Trump Jr, the president-elect’s eldest son, in Houston just before the election.
“Trump can’t do what he wants to do on China without Mexico,” Loo said.
Mexico’s role as an alternative to China has in recent years propelled a construction boom in Monterrey.
Wisdom Digital Logistics, which operates warehouses and arranges trucking for businesses on both sides of the border, recently opened a fourth warehouse in the area and is already looking for a fifth.
An aerial view of the early construction work on a Volvo car factory in Monterrey.Credit: NYT
“We’re getting calls from all over the place — the French, the Germans, the Italians,” said the company’s chief executive, Edgar Pereda. “They want to know how to guarantee their supply chains, and they’re trying to establish a presence in Mexico.”
German home-appliance giant, Bosch has shifted some production from China to Mexico, opening a factory in Monterrey in July. That has generated business for local suppliers
In recent years, Chinese companies have constructed factories in Mexico, making use of a North American free-trade pact to gain access to the US market. So long as they satisfy so-called rules of origin — requirements that certain percentages of parts and raw materials are drawn from North American suppliers — their products are treated as Mexican made. They qualify for duty-free access into the US.
‘We are together in this adventure, the United States and Mexico. We need each other. A divorce is never cheap.’
Daniel Córdova
Last year, Chinese companies made 42 investments in Mexico totalling $US3.77 billion, more than tripling the volume in the years before 2020, according to the Rhodium Group, an independent research organisation.
A single industrial park on a former cattle ranch north of Monterrey is home to 40 Chinese companies that have built factories. Developers recently acquired acreage nearby for an expansion.
Within the US political sphere, Chinese investment in Mexico is frequently described in nefarious terms, as the forging of a backdoor into the US. But one of the developers of the industrial park, César Santos, argued that the presence of Chinese brands represented a triumph of the North American trading bloc. Chinese companies are employing Mexican workers while buying parts and materials from suppliers as far away as the US and Canada.
Daniel Córdova, who oversees a Trane factory that makes air conditioning units for the American company, at the plant outside Monterrey.Credit: NYT
The terms of the North American bloc were negotiated by Trump, who called it “the largest, most significant, modern and balanced trade agreement in history.” If Trump imposes indiscriminate tariffs on Mexican exports, he will effectively be renouncing his own deal, Santos said.
The pact, known as the US-Mexico-Canada Agreement, is due for a formal review in 2026. Some experts see Trump’s tariff threat as a way to force the Canadian and Mexican governments to agree to an earlier renegotiation of its terms. He could seek to add rules making it harder for Chinese companies to use Mexico as an entry point to the American market.
The vehicle industry will almost certainly command special focus in any renegotiation. Under current terms, Chinese car makers can set up factories in Mexico and sell cars into the United States free of duty, provided that parts and materials from the region make up at least 75 per cent of the value of the finished vehicles.
Seeking to prevent that possibility, Trump has threatened tariffs as high as 200 per cent on all cars made in Mexico.
Vehicle industry leaders in Mexico note that such a policy would sharply increase costs for Americans.
“It’s not that Trump wants to make a commercial war with Mexico because that would be a war with the United States itself,” said Manuel Montoya, chief executive of a vehicle industry trade association in Monterrey. Rather, he said, Trump is likely to press to alter details of the North American trade agreement in a way that constrains Chinese companies.
With that prospect in mind, Mexican businesses well beyond the vehicle industry are seeking to limit their dependence on components from China while lining up North American substitutes.
Córdova, who oversees the Trane plant, now spends much of his time seeking out Mexican manufacturers that can produce the electronics and motors he has long imported from China. He figures that will limit the company’s vulnerability to any policies coming from Trump.
“We don’t know what decisions he could take,” he said. “We need to prepare for different scenarios. There are many variables.”
This article originally appeared in The New York Times.
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