By AFP
March 5, 2025
Trucks queue near the Mexico-US border - Copyright AFP Guillermo Arias
Trucks queue near the Mexico-US border - Copyright AFP Guillermo Arias
Alexander Martinez
For decades, Mexico’s industrial borderlands boomed thanks to growing trade with the world’s largest economy next door. Today, US tariffs cast a long shadow over a region home to thousands of factories employing armies of workers.
Lower labor costs, tax incentives and a North American free trade pact dating back more than 30 years have long lured companies south of the US border.
But President Donald Trump’s 25-percent duties on Mexican goods have heaped doubt on the future of the trade agreement, which was renegotiated during his 2017-2021 first term.
Manufacturers of goods ranging from medical supplies to semiconductors and other electronic components will be hit by the tariffs, said Jose Luis Contreras, president of the Mesa de Otay Industrial Association in Tijuana, just south of California.
Some products like car parts cross the Mexican-US border several times during production.
In the Tijuana region, whose industrial parks are home to around 400 companies, a million cargo border crossings are made each year, according to official figures.
Following Trump’s imposition of tariffs, Mexico’s “domestic market must be reoriented,” Contreras told AFP in an interview.
He said that could mean replicating the production chains of the USMCA free trade deal between the United States, Mexico and Canada in the Latin American nation, home to 130 million people.
It also requires offering tax incentives and seeking new markets, he added.
“Action must be taken quickly” given the high stakes, notably 80,000 factory jobs just along the stretch of the border near Tijuana, said Contreras, a metalworking businessman.
The tariffs have dealt a heavy blow to Mexico’s hopes of attracting US-owned factories from Asia to its industrial north, a trend known as “nearshoring.”
President Claudia Sheinbaum warned Wednesday that Mexico would seek other trading partners besides the United States if needed.
She has vowed to respond to Trump’s tariffs with retaliatory duties, calling on supporters to mass in Mexico City’s main square on Sunday to hear details.
Sheinbaum has previously hailed the USMCA as “one of the best trade agreements in history” and “the only way we can compete with Asian countries, particularly China.”
She has proposed replacing Chinese imports with domestically produced goods — an apparent bid to ease Washington’s concerns that Chinese companies want to use Mexico as a backdoor into the United States.
US Treasury Secretary Scott Bessent said Friday that Mexico had also proposed matching Washington’s tariff hikes on China.
– ‘Unfair trade practices’ –
In Mexico’s northeastern state of Nuevo Leon, business leaders who favor maintaining close ties with Washington pointed the finger at China as the trade tension culprit.
“The common problem that we have in the United States and Mexico is the position of China,” said Maximo Vedoya, president of CAINTRA, an organization that represents several thousand companies.
“China is the one that disrupts all world trade,” he told reporters Tuesday, accusing the Asian giant of “unfair trade practices.”
The answer was not US-Mexico trade barriers but “strengthening the North American region” to make it more competitive, added Vedoya, chief executive of a steel products maker.
The United States is Mexico’s top trading partner, buying more than 80 percent of its exports.
Analysts have warned the US duties could push Mexico’s economy, the second largest in Latin America, into recession.
Sheinbaum has accused Trump of violating the USMCA, which replaced the previous NAFTA accord in 2020 and is due for review next year.
“Are we to blame for companies deciding to come to Mexico to export to the United States? No, it’s the result of a good relationship since President Trump’s first term and the trade agreement that came before,” she said.
Contreras doubts the United States can quickly replace the labor and skills developed in Mexico during decades of trade.
“We may be less competitive, but in the end we will still be competitive,” he said.
Why Mexican manufacturers seem unfazed by threat of Trump tariffs
By AFP
March 1, 2025
The Tijuana region is home to hundreds of 'maquiladoras' -- factories that assemble imported parts into finished products for export - Copyright AFP Guillermo Arias
By AFP
March 1, 2025
The Tijuana region is home to hundreds of 'maquiladoras' -- factories that assemble imported parts into finished products for export - Copyright AFP Guillermo Arias
Eduardo JARAMILLO with Yussel GONZALEZ in Mexico City and Victor ALVAREZ in Monterrey
If US President Donald Trump is to be taken at his word, Mexican imports to the United States will be hit with 25-percent tariffs on Tuesday.
But exporters in Mexico, the United States’ biggest trading partner, remain upbeat about the future of the $840-billion business relationship.
Mexico’s economy has gone from strength to strength on the back of the free trade agreements it has enjoyed with the United States and Canada since 1994.
The value of its exports to the United States now far exceeds that of its imports from its northern neighbor — a major bone of contention for Trump.
On Tuesday, the tariffs he announced on all Mexican imports shortly after taking office are due to go into effect, after being suspended for a month.
Mexican manufacturers, however, are not as worried as you might imagine.
– Been there, done that –
Marco Antonio Lopez has experience when it comes to navigating economic upheaval, from the sudden devaluation of the Mexican peso in 1994 that sent the economy into meltdown to Trump’s first presidency, when the Republican threatened to pull the plug on the North America free trade deal.
In the end, the US leader renegotiated parts of the deal, but trade remains mostly tariff-free.
Lopez’s company SMK Electronica, based in the city of Tijuana on the border with the United States, manufactures electronic components for the automotive, audiovisual and telecoms industries.
The Tijuana region is home to hundreds of “maquiladoras” — factories that assemble imported parts into finished products for export, particularly to the United States.
“We have faced many crises. The previous Trump administration was not as drastic, but it was very similar and we learned to adapt,” Lopez said.
“The border industry is highly adaptable… and the investment is so great that there is no risk of it disappearing.”
The automobile industry is under particular threat from the impending tariffs.
A representative of an auto parts maker with operations in Mexico who did not want to be identified said that US-Mexico trade was too big to fail, but that tariffs could have an impact on production nonetheless.
“Products will become more expensive and there will be a clear loss in competitiveness,” the person told AFP.
– Interdependence –
Besides tequila and avocados, Mexico is one of the United States’ biggest suppliers of cars, car parts and mechanical and electronic equipment.
Free trade has made North America a seamless manufacturing platform, with products like car key fobs, which are assembled in Mexico, crossing borders on the continent several times during the manufacturing process.
The aerospace industry is another example: Mexican companies manufacture components for US partners such as Boeing and General Electric in the northern city of Monterrey as well as in the central state of Queretaro.
The mere development of a part for an aircraft engine can take between two and three years.
“Changing suppliers in this sector is a rather complicated process,” said Erik Palacios, director of the Monterrey aerospace cluster, which groups some 40 companies.
He predicted that US customers “will continue buying at a higher price” until they can develop a local supply chain.
Citing a recent conversation with an executive from US carmaker Ford, Mexican Economy Minister Marcelo Ebrard said that the brand’s two most productive plants are in Mexico.
That fact alone, he said, suggested that there were no plans to relocate them north of the border.
– The long-term view –
Companies that AFP spoke to said that decisions to locate manufacturing plants in Mexico were taken years in advance, and would likely outlast Trump’s four years in office.
“Decisions in these companies are not made six months or a year in advance. They are made five or ten years ahead of time,” SMK Electronica’s Lopez said.
German automaker BMW, which has an assembly plant in the Mexican state of San Luis Potosi, subscribes to that view.
“We do not base our long-term strategic decisions on policies or political incentives,” a company spokesman told AFP.
The spokesman pointed to the company’s announcement in early 2023 of an 800-million-euro ($830 million) investment in the production of lithium batteries in Mexico and the decision to start producing electric vehicles in Mexico in 2027.
That, they said, was proof that BMW was banking on the Latin American country for years to come.
If US President Donald Trump is to be taken at his word, Mexican imports to the United States will be hit with 25-percent tariffs on Tuesday.
But exporters in Mexico, the United States’ biggest trading partner, remain upbeat about the future of the $840-billion business relationship.
Mexico’s economy has gone from strength to strength on the back of the free trade agreements it has enjoyed with the United States and Canada since 1994.
The value of its exports to the United States now far exceeds that of its imports from its northern neighbor — a major bone of contention for Trump.
On Tuesday, the tariffs he announced on all Mexican imports shortly after taking office are due to go into effect, after being suspended for a month.
Mexican manufacturers, however, are not as worried as you might imagine.
– Been there, done that –
Marco Antonio Lopez has experience when it comes to navigating economic upheaval, from the sudden devaluation of the Mexican peso in 1994 that sent the economy into meltdown to Trump’s first presidency, when the Republican threatened to pull the plug on the North America free trade deal.
In the end, the US leader renegotiated parts of the deal, but trade remains mostly tariff-free.
Lopez’s company SMK Electronica, based in the city of Tijuana on the border with the United States, manufactures electronic components for the automotive, audiovisual and telecoms industries.
The Tijuana region is home to hundreds of “maquiladoras” — factories that assemble imported parts into finished products for export, particularly to the United States.
“We have faced many crises. The previous Trump administration was not as drastic, but it was very similar and we learned to adapt,” Lopez said.
“The border industry is highly adaptable… and the investment is so great that there is no risk of it disappearing.”
The automobile industry is under particular threat from the impending tariffs.
A representative of an auto parts maker with operations in Mexico who did not want to be identified said that US-Mexico trade was too big to fail, but that tariffs could have an impact on production nonetheless.
“Products will become more expensive and there will be a clear loss in competitiveness,” the person told AFP.
– Interdependence –
Besides tequila and avocados, Mexico is one of the United States’ biggest suppliers of cars, car parts and mechanical and electronic equipment.
Free trade has made North America a seamless manufacturing platform, with products like car key fobs, which are assembled in Mexico, crossing borders on the continent several times during the manufacturing process.
The aerospace industry is another example: Mexican companies manufacture components for US partners such as Boeing and General Electric in the northern city of Monterrey as well as in the central state of Queretaro.
The mere development of a part for an aircraft engine can take between two and three years.
“Changing suppliers in this sector is a rather complicated process,” said Erik Palacios, director of the Monterrey aerospace cluster, which groups some 40 companies.
He predicted that US customers “will continue buying at a higher price” until they can develop a local supply chain.
Citing a recent conversation with an executive from US carmaker Ford, Mexican Economy Minister Marcelo Ebrard said that the brand’s two most productive plants are in Mexico.
That fact alone, he said, suggested that there were no plans to relocate them north of the border.
– The long-term view –
Companies that AFP spoke to said that decisions to locate manufacturing plants in Mexico were taken years in advance, and would likely outlast Trump’s four years in office.
“Decisions in these companies are not made six months or a year in advance. They are made five or ten years ahead of time,” SMK Electronica’s Lopez said.
German automaker BMW, which has an assembly plant in the Mexican state of San Luis Potosi, subscribes to that view.
“We do not base our long-term strategic decisions on policies or political incentives,” a company spokesman told AFP.
The spokesman pointed to the company’s announcement in early 2023 of an 800-million-euro ($830 million) investment in the production of lithium batteries in Mexico and the decision to start producing electric vehicles in Mexico in 2027.
That, they said, was proof that BMW was banking on the Latin American country for years to come.
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