In recent years, the concepts of “economic security” and “shore outsourcing” have been activated due to the US-China trade war, the conflict between Russia and Ukraine, and the pandemic. To avoid high tariffs, a large number of Chinese companies have set their sights on Mexico. However, this trend may undergo changes with the return of Donald Trump to the White House, raising concerns about the future direction of Chinese enterprises in Mexico.
The biggest beneficiary of the trade shift brought about by the US-China trade war has been Mexico. Since 2018, going to Mexico has become a popular choice for many Chinese enterprises.
In 2023, Mexico surpassed China for the first time in 20 years as the largest export destination of the United States. In October of that year, imports from Mexico to the United States increased by 17.5%, while imports from China dropped by 7.2%.
While Mexico has taken over as the largest export destination, it doesn’t necessarily mean that the consumption of “Chinese goods” by Americans has decreased. Many Chinese companies have relocated their production to Mexico to bypass the high tariffs imposed by the United States.
Analysts from Rhodium Group pointed out that for decades, Mexico has been importing raw materials from China for its export-oriented industries. The growth of Mexico’s exports to the United States is clearly tied to the increase in Chinese exports to Mexico.
According to a survey conducted by BBVA, a Mexican commercial bank, in 2018, Chinese enterprises accounted for only 6% of all foreign companies in Mexico. However, it is anticipated that by 2025, the proportion of Chinese companies could reach 20%.
While Chinese investments in other Latin American countries are largely focused on mining or infrastructure, in Mexico, they are concentrated in industries such as electronics, automotive, and household appliances. The model adopted by Chinese companies in Mexico involves producing components domestically and assembling them in Mexico before exporting the finished products to the United States.
Many Chinese companies have relocated to industrial parks in northern Mexico in recent years, bringing their production lines closer to the American market to avoid tariffs and sanctions imposed on Chinese goods.
One of these companies is Minhua Furniture in Monterrey, northern Mexico, where recliners and leather sofas coming off the assembly line are proudly labeled as “Made in Mexico.”
At the same time, an increasing number of Chinese individuals are migrating to Mexico.
According to the Associated Press, unlike earlier migrants who were mostly from Guangdong, the new wave of Chinese immigrants hails from various regions on the mainland. These individuals, attracted by Chinese companies, include many with higher levels of education. Others leaving China are in search of better job opportunities or to escape the oppressive regime.
The growing volume of goods imported from China to Mexico has raised concerns about Mexico being exploited by Chinese enterprises as a “backdoor” entry to the American market to evade tariffs.
However, so far, the Biden administration has not taken significant actions concerning China’s growing influence and activities in Mexico.
Secretary of State nominee Rubio issued a warning in September, stating that the Congress passed a free trade agreement with Mexico, not with China. Immediate action must be taken to prevent the Chinese Communist Party from weaponizing the USMCA.
Trump’s reelection and the upcoming review of the USMCA in 2026 provide an opportunity for change.
During his campaign, Trump emphasized renegotiating the USMCA to address Chinese companies using Mexico as a backdoor into the North American market. He also threatened to impose tariffs of 100%, 200%, or even 1000%, if necessary.
Upon his election, Trump claimed that on his first day in office, if Mexico and Canada did not stop drug trafficking and illegal immigration, all products entering the US from these countries would face a 25% tariff. Additionally, an extra 10% tariff would be imposed on Chinese goods if the authorities in China failed to curb drug flows.
An article in Foreign Policy in May this year highlighted the increasing Chinese challenge faced by the United States in Mexico, hindering efforts to establish deeper partnerships in foreign direct investment, critical infrastructure, and the fentanyl crisis.
In 2023 alone, Chinese companies announced plans to invest $12.6 billion in Mexico. Members of the Mexican Association of Private Industrial Parks project that within the next two years, one in every five new clients will be a Chinese enterprise.
Moreover, the growing presence of Chinese enterprises in strategic industries such as electric vehicles, mining, ports, technology, and telecommunications could undermine US economic and national security interests.
Subsidized BYD and other Chinese electric vehicle manufacturers plan to build factories in Mexico. While on the surface, it might seem like production is for the Mexican market, it could also serve as a way to evade the 100% tariffs imposed on Chinese electric vehicles by the United States.
Furthermore, at least seven Chinese companies sanctioned by the United States for supporting the Chinese military and intelligence apparatus are operating in Mexico, with Huawei being the most prominent. Despite US efforts to counter Huawei globally, the Mexican government maintains an open stance towards collaborating with Huawei.
The widespread presence of companies closely linked to the Chinese Communist Party, such as Huawei, in Mexico poses significant security risks for American companies seeking to invest or expand in Mexico and hinders bilateral cooperation in addressing cross-border cyber threats.
Another sanctioned company operating in Mexico is CCCC (China Communications Construction Company), a key player in the Belt and Road Initiative’s projects worldwide.
Hutchison Ports, a part of the Chinese-controlled global port network, owns four of the five major ports in Mexico. These ports receive a significant influx of containers from China, sparking concerns about Chinese companies using Mexico to evade US tariffs.
The upcoming review of the USMCA in 2026 will consider the presence of China in Mexico as a primary factor. If Mexico fails to renew the agreement with the United States, billions of dollars in bilateral trade and investments could be at risk.
Currently, Mexico is a major trading partner of the United States but not a strategic ally. Becoming a strategic partner of the United States implies aligning more consistently on issues related to China. This does not mean Mexico fully supports Washington’s stance on China but signals that the relationship between Mexico and China will not harm shared core interests, prioritizing those of North America.
Apart from the United States, Canadian Prime Minister Trudeau has also expressed concerns about China using Mexico to circumvent tariffs.
On November 29, former Canadian Finance Minister Chrystia Freeland stated that the USMCA member countries have the opportunity to develop a united policy on China.
“We believe that today all USMCA countries have the opportunity to work together to develop a common policy on China to protect all of our workers and ensure we support each other in this truly important matter,” Freeland said.
The emergence of Chinese enterprises as a significant presence in the Mexican economy traces back to 2013 when Xi Jinping conducted a state visit to Mexico, elevating the relationship between the two nations to a “comprehensive strategic partnership.”
Discussions on the China-Mexico relationship ultimately center around the trilateral dynamic with the United States. Trump’s presidency may pose challenges for Chinese enterprises.
On November 22, newly inaugurated Mexican President Claudia Sheinbaum publicly stated that Mexico is not a “backdoor” for Chinese products entering the United States and Canada. She declared that during meetings with Canada and President-elect Trump, they would demonstrate that the notion of Chinese products entering via Mexico is erroneous.
The Mexican Ministry of Economy also announced plans to conduct nationwide “cleansing” operations to combat the influx of illegal goods from China.
On November 28, around 200 officials raided a shopping mall in Mexico City known for selling Chinese goods. The government seized over 260,000 items valued at 7.5 million pesos (approximately $370,000).
On November 29, Economic Minister Marcelo Ebrard announced that searches would be carried out in all 32 states of Mexico, including ports and airports, to crack down on illegal imports from China.
These intensified efforts to combat illegal imports from China demonstrate Mexico’s willingness to cooperate with Trump.
Mexico’s economic development has benefited greatly from the strong purchasing power of the United States. Since signing the North American Free Trade Agreement (NAFTA) in 1994, Mexico’s GDP per capita has risen from $6268.72 in 1994 to $13,900 in 2023.
As tensions in the US-China comprehensive competition escalate, Mexico may no longer be able to pursue a balancing act in its so-called “non-aligned theory” and must make a choice.
The future development of Chinese enterprises in Mexico warrants close attention.