By Peter S. Goodman
Like many in the Mexican business landscape, Daniel Córdova is contending with a significant factor looming over the U.S. border: the anticipated return of Donald Trump to the presidency.
Córdova manages a facility near Monterrey that produces heating and cooling units for Trane, a U.S. company. During Trump’s first term, he initiated a trade conflict with China that ended up benefiting Mexican industries. Businesses that depended on Chinese manufacturers for producing goods intended for the U.S. market relocated operations to Mexico to evade Trump’s tariffs.
This trend, referred to as “nearshoring,” picked up speed when President Joe Biden upheld tariffs on Chinese goods. Rising shipping costs amid the pandemic underscored the challenges of depending on overseas factories. For firms aiming to bridge the gap between Asian manufacturing and their U.S. customers, Mexico emerged as an appealing production site.
However, in November, Trump disrupted the nearshoring dynamics by threatening to introduce 25% tariffs on all goods entering the U.S. from Mexico and Canada. Mexican industry faced a critical dilemma: Was Trump merely bluffing to coax the Mexican government into curbing the flow of people and drugs towards the border? Or was he genuinely set on imposing tariffs on Mexican imports to compel companies to relocate their production to the United States?
The outcome weighs heavily on Mexico’s investment pace and job creation, alongside the abundance of imported goods available in the United States—from fresh produce to auto components.
At the Trane plant in the industrial area of Apodaca, Córdova is preparing. Should the tariffs come to fruition, the company could redirect orders to its U.S. plants. Yet, he stays hopeful that the current arrangement will continue, as both the Mexican and U.S. economies are intertwined, relying on one another for components and raw materials for their finished goods. Despite Trump’s unpredictable nature, Córdova struggles to envision him hindering the flow of products across the border—an action that economists warn would inflate costs for American consumers and hinder economic expansion.
“We are in this together, the United States and Mexico,” Córdova stated, as machinery in his plant transformed chunks of metal into components for heating units that would be assembled in Tennessee. “We depend on each other. A separation is always costly.”
With the Trump administration promising an escalated trade conflict, firms in Mexico are moving forward with their factory growth plans. They believe their nation remains vital to the U.S. objective of reducing reliance on Chinese manufacturing.
Numerous Mexican business leaders argue their companies are poised to prosper during another Trump tenure. Provided he continues his pledge to raise tariffs on Chinese imports, that will increase the demand for alternative manufacturing locations.
“Trump despises China more than he dislikes Mexico,” remarked Isaac Presburger, whose family-owned apparel company near Mexico City has long sold products to the U.S. market. “This presents a significant opportunity.”
For the moment, uncertainty prevails. Mazda, a Japanese automotive company, is postponing future investments in Mexico until Trump’s agenda clarifies. Honda has communicated to investors that duties on Mexican-manufactured vehicles might compel it to consider relocating production.
“If I were on a corporate board or a CEO, I would seriously reconsider investing in Mexico right now until more details emerge,” suggested Shannon K. O’Neil, a Latin America expert at the Council on Foreign Relations in New York.
The nearshoring surge has been significant in Monterrey, a sprawling metropolis with over 5 million residents nestled in a desert valley encircled by the rugged Sierra Madre mountains. As the capital of Nuevo Leon state, Monterrey is just three hours from the U.S. border by truck and is known for its relative safety alongside upscale hotels and dining options. This mix has drawn foreign investment.
Over the initial 11 months of this year, nearly $23 billion in foreign capital has been committed to over 100 initiatives, according to the regional government. Volvo, a Swedish firm, has recently begun constructing a truck manufacturing plant. John Deere is working on a facility to produce construction machinery.
One recent evening, Emmanuel Loo, the economy secretary of Nuevo Leon, hosted a gathering at an outdoor eatery, serving tacos to two consultants—one a former executive at Intel, the American semiconductor giant. Loo had engaged them to help attract investment that could establish the state as a semiconductor industry hub.
He conveyed confidence that the Trump administration would not derail these initiatives. He mentioned having received assurances during a meeting with Donald Trump Jr., the president-elect’s eldest son, in Houston shortly before the election.
“Trump cannot execute his plans regarding China without involving Mexico,” Loo stated.
Mexico’s position as a substitute for China has in recent years spurred a construction boom in Monterrey.
Wisdom Digital Logistics, which manages warehouses and facilitates trucking for businesses operating on both sides of the border, recently opened a fourth warehouse in the region and is scouting for a fifth.
“We’re receiving inquiries from various sources—France, Germany, Italy,” commented the company’s CEO, Edgar Pereda. “They are keen to learn how to secure their supply chains and are attempting to establish a footprint in Mexico.”
Córdova, in charge of the Trane facility, now dedicates much of his time to locating Mexican manufacturers capable of producing the electronics and motors he has historically sourced from China. He believes this will minimize the company’s exposure to any policies stemming from Trump.
“We can’t predict the decisions he might make,” he said. “We need to brace ourselves for various outcomes. There are many factors at play.”
