The Economy Ministry (SE) reported Tuesday that FDI in Mexico was $20.313 billion between January and March, an increase of almost $1.7 billion compared to the same period of last year.

Foreign investment in Mexico in the first quarter was double that received in the same period of 2019 — President Andrés Manuel López Obrador’s first full year in office, and four times higher than the $5 billion received between January and March 2013, when Enrique Peña Nieto was beginning the first full year of his presidency.

The $20.31 billion first quarter result is equivalent to 59% of the $36.06 billion in FDI Mexico received last year.

The record-high FDI result comes at a time when Mexico is aiming to capitalize on the growing nearshoring trend. The SE reported late last month that foreign companies made 93 investment announcements between Jan. 1 and April 15, and that $36.15 million in FDI for Mexico was consequently expected to flow into the country in the next two or three years.

But only 3% of the FDI Mexico received in the first quarter of the year — around $600 million — represented new foreign investment in Mexico, down from 5% in the same period of 2023. The percentage figure is well below the 13% contribution that new investment made to the total Mexico FDI last year and the 48% contribution it made in 2022.

The SE said that 97% of Mexico FDI between January and March — a total of $19.6 billion — was reinvestment of profits by foreign companies and investors that already had a presence in the country.

Loans and payments between companies of the same corporate group contributed around $100 million to the Mexico FDI total, a figure equivalent to less than 0.5% of the total.

While the federal government would no doubt be disappointed that the new investment portion of FDI wasn’t higher amid what has been described as a nearshoring “boom” in Mexico, it chose to focus on the positives.

“As the result of the country’s economic stability and the good business environment, the reinvestment of profits reached a new record high for a second consecutive year,” the SE said in a statement, adding that “this reconfirms foreign investors’ confidence in the country.”

For his part, López Obrador highlighted the “historic record” in the “arrival of foreign investment” in Mexico in the first quarter and remarked that the capital represents jobs, income and “well-being” for Mexican workers.

“There is no economic stagnation,” he told reporters at his Wednesday morning press conference. “There continues to be progress with justice in our country.”

Which countries made the biggest Mexico investments?

The SE reported that 52% of the Mexico FDI total — $10.61 billion — came from United States companies and investors.

The next biggest foreign investors, according to their country of origin, were:

• Germany, $1.74 billion, or 9% of the FDI total.
• Canada, $1.7 billion, or 8% of the total.
• Japan, $1.43 billion, or 7% of the total.
• Argentina, $840 million, or 4% of the total.
• Switzerland, $764 million, or 4% of the total.
• South Korea, $641 million, or 3% of the total.
• Netherlands, $530 million, or 3% of the total.
• Spain, $351 million, or 2% of the total.
• Brazil, $164 million, or 1% of the total.

Over 90% of the Mexico FDI total in the first quarter of the year came from companies and investors based in the 10 countries listed above.

Which states in Mexico saw the most investment?

Mexico City was easily the largest recipient of FDI among the country’s 32 federal entities.

Just over $12 billion — or 59% of the Mexico FDI total — was invested in the capital, where numerous foreign companies have offices. An infographic published by the SE showed that Banamex (part of the U.S. company Citi), J.P. Morgan and Coca-Cola were among the companies that invested in Mexico City between January and March.

The next biggest recipients of FDI in the first quarter of the year were:

• Nuevo León, $1.35 billion, or 7% of the total.
• Baja California, $1.08 billion, or 5% of the total.
• Veracruz, $685 million, or 3% of the total.
• Chihuahua, $683 million, or 3% of the total.
• México state, $675 million, or 3% of the total.
• San Luis Potosí, $664 million, or 3% of the total.
• Guanajuato, $597 million, or 3% of the total.
• Jalisco, $593 million, or 3% of the total.
• Querétaro, $489 million, or 2% of the total.

Over 90% of the Mexico FDI total for the first quarter of the year went to the 10 states listed above.

Sectors with the most outside investment

Just over $8.5 billion, or 42% of the total of first-quarter Mexico FDI, went to the manufacturing industry. The transport equipment industry (which includes Mexico’s large auto sector), the beverages and tobacco industry, the food industry and the chemicals industry were among the top recipients of manufacturing FDI, the SE said.

After manufacturing, the largest recipients of FDI by sector in the first quarter of the year were:

• Financial services, $5.15 billion, or 25% of the total.
• Mining, $2.37 billion, or 12% of the total.
• Transport, $1.27 billion, or 6% of the total.
• Wholesale, $1.04 billion, or 5% of the total.
• Retail, $598 million, or 3% of the total.
• Temporary accommodation, $329 million, or 2% of the total.
• Mass media, $290 million, or 1% of the total.

Mexico News Daily 

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Will the United States impose additional measures targeting products made in Mexico by Chinese companies or goods shipped from China to the U.S. via Mexico?

“Stay tuned” was the message United States Trade Representative Katherine Tai conveyed to reporters on Tuesday.

Ambassador Tai attended a White House press briefing after United States President Joe Biden directed her to increase tariffs on US $18 billion of imports from China (see below).

As soon as the floor opened to questions, a reporter noted that major Chinese EV company BYD is planning to establish a manufacturing presence in Mexico, and asserted that the cars it makes south of the border “could flood the U.S. market” — even though the automaker itself says it has no intention of exporting to the United States.

“Why isn’t the administration preemptively announcing tariffs to hit these vehicles?” the reporter asked.

After expressing concern about BYD’s presence in Mexico – “at USTR, that is exactly what we are built to worry about” – Tai said that measures aimed at made-in-Mexico Chinese EVs, or other products made here by Chinese companies, “will require a separate pathway.”

“This is about imports from China. What you’re talking about would be imports from Mexico. Equally important — something that we were talking to our industry, our workers, and our partners about. And I would just ask you to stay tuned,” she said.

Later in the briefing, the trade representative was asked whether her “stay tuned” remark could be interpreted as her saying that “there could be some changes” to the United States-Mexico-Canada Agreement (USMCA) rules, which are up for review in 2026, or “to the law that would allow the U.S. to apply tariffs on goods from China that originate in Mexico or other third countries?”

“What I’m saying is the fact pattern that’s developing is one that is of serious concern to us and that, at USTR, we are looking at all of our tools to see how we can address the problem,” Tai responded.

The USTR, as the trade representative’s office is known, subsequently said that it could take several actions other than tariffs to stop China using Mexico as a workaround.

According to an Associated Press report, the office noted that there are provisions within the USMCA to “address unfair subsidies and efforts to avoid import duties.”

Donald Trump, who could be back in the White House in less than eight months, apparently favors tariffs. He said in March that he would impose a 100% tariff on cars manufactured in Mexico by Chinese companies if he wins the upcoming United States presidential election.

How will the new tariffs announced by the United States affect Mexico? 

Before considering the question above, let’s take a closer look at the tariffs announced by the U.S. government. The largest tariff increase is that for EVs made in China, with duties set to increase from 25% to 100% this year.

Tai said on Tuesday that “after thorough review of the statutory report on Section 301 tariffs, and having considered my advice, President Biden is directing me to take further action to encourage the elimination of the People’s Republic of China’s unfair technology transfer-related policies and practices that continue to burden U.S. commerce and harm American workers and businesses.”

“… While the [current] tariffs have been effective in encouraging the PRC to take some steps to address the issues identified in the Section 301 investigation, further action is required. In light of President Biden’s direction, I will be proposing modifications to the China tariffs under Section 301 to confront the PRC’s unfair policies and practices,” she added.

In a statement, the USTR said that “Ambassador Tai will propose the following modifications in strategic sectors:”

• Battery parts (non-lithium-ion batteries): Increase rate to 25% in 2024.
• Electric vehicles: Increase rate to 100% in 2024.
• Face masks: Increase rate to 25% in 2024.
• Lithium-ion electrical vehicle batteries: Increase rate to 25% in 2024.
• Lithium-ion non-electrical vehicle batteries: Increase rate to 25% in 2026.
• Medical gloves: Increase rate to 25% in 2026.
• Natural graphite: Increase rate to 25% in 2026.
• Other critical minerals: Increase rate to 25% in 2024.
• Permanent magnets: Increase rate to 25% in 2026.
• Semiconductors: Increase rate to 50% in 2025.
• Ship to shore cranes: Increase rate to 25% in 2024.
• Solar cells: Increase rate to 50% in 2024.
• Steel and aluminum products: Increase rate to 25% in 2024.
• Syringes and needles: Increase rate to 50% in 2024.

Those increased tariffs will provide Mexico with the opportunity to further increase its exports to the United States, according to Gabriela Siller, director of economic analysis at the Mexican bank Banco Base.

“The stronger the trade war between the United States and China, the more potential Mexico has to export to the U.S. market,” she told the El Economista newspaper.

Mexico has also already dethroned China as the top exporter of goods to the United States, sending products worth more than US $475 billion to the U.S. last year. Tariffs imposed on China by the Trump administration and maintained by the Biden administration are seen as the main factor that allowed Mexico to dislodge China from the top spot.

El Economista acknowledged that the new tariffs announced by the United States on Tuesday are primarily designed to benefit companies in the U.S.

However, “countries like Mexico could obtain secondary gains,” the newspaper said before noting that that the United States’ North American trade partners will benefit from a stronger industrial sector in the U.S. due to the integration of supply chains in the region.

One of the sectors in which Mexico and the United States are seeking to increase integration is semiconductors. United States authorities said in March that the U.S. would partner with Mexico in a new semiconductor initiative whose ultimate aim is to strengthen and grow the Mexican semiconductor industry.

Siller noted that Mexico is well placed to benefit from the increased U.S. tariffs on Chinese goods due to its proximity to the United States and because of the USMCA, which allows most Mexican exports to enter the U.S. market duty-free.

But — as Tai indicated — goods made in Mexico by Chinese companies may not enjoy tariff-free status in the U.S. market at some point in the not-too-distant future. Such a scenario would appear to be of significant concern to Chinese companies that have established a manufacturing presence in Mexico to circumvent tariffs imposed by the Trump administration.

Mexico gives China “a back door” into the United States because, along with the U.S. and Canada, it is party to the USMCA, The Economist reported last year. But that door, judging by Tai’s comments, is currently swinging in the wind and could slam shut — or at least be heavily reinforced with protectionist measures — very soon.

Among the Chinese companies with Mexican operations that would be affected by U.S. protectionist measures aimed at them are auto-parts manufacturers that supply U.S.-based automakers.

Will the United States’ higher tariffs work? Stopping rerouting through Mexico will be key. 

Following the U.S. government’s announcement of new tariffs on a range of Chinese goods, Reuters reported that “U.S. officials and trade experts say that without strong efforts to cut off transshipped or lightly processed Chinese goods from Mexico and other countries, China’s underpriced excess production will still find its way into U.S. markets.”

Eswar Prasad, trade policy professor at Cornell University and a former China director at the International Monetary Fund, told the news agency that “the new tariffs might keep out imports from China but it is likely that much of those imports could be rerouted through countries not subject to the tariffs.”

He said that Mexico and Vietnam have benefited from the United State-China trade war, and remarked that both countries need to avoid the “ire” of the U.S. government while they continue to seek benefits from Chinese manufacturing investment.

Mexico is thus in something of a catch-22 situation. President Andrés Manuel López Obrador has said that Chinese investment in welcome, but his government late last year reached an agreement with United States government to cooperate on foreign investment screening, a move that appeared to be motivated to a large degree by a desire to stop problematic Chinese investment in Mexico.

In addition, Mexico last month implemented new tariffs on hundreds of imports from countries with which it doesn’t have trade agreements – another move that appeared mainly directed at China.

The implementation of new tariffs by the Mexican government came amid growing concern in the United States about Mexico becoming a transshipment hub for Chinese goods headed to the U.S.

In a meeting with Mexico’s Economy Minister Raquel Buenrostro in February, Ambassador Tai, according to a USTR statement, “stressed the urgent need for Mexico to take immediate and meaningful steps to address the ongoing surge of Mexican steel and aluminum exports to the United States and the lack of transparency regarding Mexico’s steel and aluminum imports from third countries.”

USTR Senior Advisor Cara Morrow told Reuters that the trade agency has been speaking with Mexican officials about ways to reduce the routing of Chinese steel and aluminum through Mexico to the United States.

She said that U.S. officials have stressed to their Mexican counterparts that the aim of the USMCA is to promote North American integration and competitiveness, “not to provide a back door to China.”

For his part, William Reinsch, a trade expert at the Center for Strategic and International Studies in Washington, told Reuters that attempting to block Chinese excess production “is like squeezing a balloon.”

“It shrinks in one place and pops out in another,” he said.

BYD reacts to the tariffs announcement  

In late February, BYD’s Americas CEO Stella Li confirmed the company would build a plant in Mexico, and asserted it will only make vehicles for the Mexican market here.

“Our plan is to build the facility for the Mexican market, not for the export market,” she said.

Li said that officials in Mexico had been receptive to BYD’s plans to build a factory here.

However, Mexican officials who spoke with Reuters last month said that pressure from the United States had led the Mexican government to refuse to offer incentives to Chinese EV manufacturers planning to invest in Mexico. “Welcome to the country,” Mexico appears to be saying, “but don’t expect us to do anything for you.”

As for the higher tariffs announced by the United States on Tuesday, Li said they won’t have any impact on BYD.

“We don’t have plans to go to the U.S. market, so this announcement does not impact us at all,” she said.

“When we build a Mexican plant, we only consider the Mexican market and other countries’ markets, we have not considered the U.S.,” Li added.

Currently, very few Chinese vehicles are exported to the United States, a status quo the U.S. is clearly determined to maintain.

Reuters reported that in the first quarter of 2024 “Geely was the only Chinese automaker to export to the United States with 2,217 cars, according to data from the China Passenger Car Association.”

With regard to the planned BYD plant in Mexico, Li said there is a shortlist of potential sites, but explained that “deeper dialogue” was needed before a final decision could be made.

The plant is expected to have the capacity to make 150,000 vehicles per year.

Li said that BYD hadn’t discussed incentives with the Mexican government, and didn’t disclose any incentives the company is seeking from federal or state authorities. However, she indicated that she expected that authorities in Mexico – despite what the officials told Reuters last month – will be willing to roll out the red carpet for BYD, the world’s largest EV company by sales in the final quarter of 2023.

“I think all the states will try their best to give a best offer to attract us because we will be bringing a lot of technology there and create a lot of local jobs. Every state, and even the central government, would love this kind of investment,” Li said.

With reports from Reuters and El Economista 

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This week, Idaho-based Micron Technology announced plans to establish a semiconductor engineering center in Guadalajara with the expectation of hiring 100 employees by the end of this year.

The core objective of the Mexico-U.S. semiconductor initiative is to consolidate the development and production of semiconductor technology in the two countries. It included a US $6.14 billion subsidy from the U.S. Department of Commerce to Micron Technology.

Micron’s selection of Guadalajara will boost the region’s technology ecosystem and allow for collaborative opportunities with local universities while also cultivating the next generation of engineering and technology professionals.

The new facility will be the first headquarters in Latin America for Micron, which produces computer memory and computer data storage including dynamic random-access memory, flash memory and USB flash drives.

Mexico’s strategic location and its numerous international trade agreements were factors in the company’s decision to open a facility in Mexico, especially as the U.S. government seeks to reduce reliance on China and Taiwan for chips.

Brian Callaway, the country manager for Micron in Mexico, spoke to Expansión magazine about the move to Mexico. “As we ramp up manufacturing in the United States, we need to maintain product innovation and that’s where our new site in Guadalajara enters the picture. It will be critical in developing solutions for next generation products,” he said.

Micron’s facility in Mexico will focus on developing products for memory solutions oriented toward fortifying the latest Artificial Intelligence tools, Callaway said.

Scott DeBoer, executive vice president of technology and products at Micron, praised Mexico’s experience in the semiconductor sector. “Mexico has a strong business ecosystem that encompasses technology and the semiconductor industry and also has an extremely talented labor force,” he said. “The engineering center and its operations in Mexico will complement Micron’s product engineering efforts in North America.”

April Arnzen, Micron’s executive vice president and personnel director, spoke highly of the Mexican labor force, saying it will “reinforce Micron’s leadership and innovation,” citing the performance of local hires at other technology companies such as Intel which also has a design center in Guadalajara.

With reports from Expansión, El Economista and Mexico Business News

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Already the owners of a steel mill in Hidalgo and two others in México state, Gerdau officials confirmed that the company has undertaken a cost-benefit analysis regarding construction of a new plant in Mexico.

If the company decides the project has commercial viability, Gerdau would begin building in 2025. The cost-benefit analysis will be finalized by the year’s end.

Manufacturing industry news site Cluster Industrial reported that the proposed plant would have the capacity to produce 600,000 tonnes of specialty steels per year. Speaking to reporters on Friday, Gerdau CEO Gustavo Werneck said that a steel mill of this size would require an investment of between US $500 million and $600 million.

Gerdau is also reviewing sites for the proposed steel mill. It is likely to be located in central Mexico, near the company’s three other plants.

Werneck told reporters that any new construction would adhere to the company’s sustainability principles, using state-of-the-art technology and its consumption of raw materials to minimize carbon emissions.

Gerdau — which claims to be the biggest recycling company in Latin America and says that 71% of its steel worldwide is produced from scrap metal — has a stated goal of reducing emissions by 0.82 tonnes of carbon per tonne of steel produced by 2031.

If the project goes forward, its production would target Mexico’s domestic market, primarily the auto industry. Werneck said Mexico’s attractiveness is bolstered by the cluster of important automakers in the country.

“Important players in the automotive industry, including current Gerdau customers, are expanding their operations to Mexico, which is becoming one of the most relevant countries in the production of automotive parts,” Werneck wrote in a Friday LinkedIn post.

According to Gerdau Vice President Rafael Japur, the Mexican market consumes 1.2 million tonnes of specialty steels per year, of which 70% is imported.

With reports from Cluster Industrial, El Economista and Expansión

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On April 30, SINBON Electronics, a Taiwanese manufacturer of cable assemblies and connectivity solutions held a groundbreaking ceremony for its new plant in San Luis Potosí.

The company plans to invest US $50 million to establish its subsidiary in Mexico, with plans to build three additional factories over the next three to five years, covering a total area of some 84,000 square meters. 

“Today, we not only broke ground on the new factory but we also laid the foundation for the future development of San Luis Potosí, demonstrating our unwavering commitment to the North American market,” SINBON’s President Mite Liarng said during the ceremony. “As we till the soil today, we sow the seeds for future growth, innovation and partnership.”

Local sources have reported that the company will generate 700 jobs with the new facility. 

Founded in 1989, SINBON provides design and production services for electronic components, catering to the automotive electronics industry, the aerospace industry, the medical devices industry and the consumer electronics industry. In Mexico, it will focus on the production of electrical components for the automotive and green energy sectors. The company has operations in Taiwan, China, Japan, the United Kingdom, Germany, Hungary and the United States. 

SINBON is the first electronic design service provider in Greater China to obtain a UL certification for its NACS (The North American Charging Standard) AC/DC charging cable, which means it can provide to brands such as Tesla, Ford, General Motors, BMW, Honda and Toyota.

San Luis Potosí was one of Mexico’s fastest-growing state economies in 2023, in large part due to nearshoring investments. In 2023, German automotive manufacturer BMW announced an investment of US $866 million in the state to manufacture high-voltage batteries and fully electric “Neue Klasse” vehicles.

With reports from Líder Empresarial

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It will be the second Chinese tire company to invest in Coahuila this year, following Yokohama Rubber which started construction on a factory last month.

Jiménez, back in Coahuila on Friday after his nine-day visit to China that included a visit to the 2024 Beijing Auto Show, told reporters five additional Chinese companies were prepared to invest an additional US $300 million in the state.

The newspaper Zocalo reported that the unnamed investors included several companies in the autoparts industry, a lithium battery recycling entity, as well as an aerospace parts and household appliance manufacturer.

The governor issued a statement on April 30 from Shanghai announcing the new ZC Rubber investment:

“Along with our team at Pro Coahuila and the president of ZC Rubber, we can formally announce the news that this great Asian company will invest 10.95 billion pesos in Coahuila which will serve to generate thousands of jobs.”

Pro Coahuila is the state government’s new Office of Economic and Tourism Promotion, established by Jiménez just over two months after he took office on Dec. 1, 2023.

The governor offered no details about ZC Rubber’s investment — i.e., the eventual location of the factory — but did say talks with the president of the Chinese tire-maker, Jin Rong Shen, and company vice president Hao Yu Shen were begun during his September tour of China while governor-elect.

The website Cluster Industrial published details of an internal ZC Rubber document dated Feb. 9, that indicated the tire-maker hopes to build its plant in Saltillo, the state capital, just 250 kilometers (155 miles) from the U.S. border. The facility — potentially up to 600,000 square meters — would feature a warehouse with plans to develop local distribution networks and optimize profitability.

“Our plan to open a tire factory in Mexico demonstrates our commitment to satisfy the growing demand for high-quality tires in the region,” Hao Yu Shen said, according to Cluster Industrial, which also reported that ZC Rubber hopes to finish the first stage of construction in 12 months.

In addition to speaking to automakers and investors at the Beijing Auto Show, Jiménez met with investors at Mexico’s Embassy in the Chinese capital while also meeting with executives in Shanghai and Changzhou.

El Economista reported that during that September 2023 tour, Gov.-elect Jiménez spoke at a conference in Shanghai entitled “Invest in Mexico, Invest in Coahuila.”

With reports from Cluster Industrial, Mexico Industry, Zocalo and Vanguardia MX

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In a decree published on Monday, the government said that 5-50% tariffs would apply to 544 products across a range of categories including steel, aluminum, textiles, wood, footwear, plastics, chemicals, paper and cardboard, ceramics, glass, electrical material, transport material, musical instruments and furniture.

The tariffs — which took effect on Tuesday — will apply for two years, according to the decree, which was issued by President Andrés Manuel López Obrador, Finance Minister Rogelio Ramírez de la O and Economy Minister Raquel Buenrostro.

Products from countries with which Mexico has trade agreements — including the United States, Canada, European Union nations and CTPPP signatories such as Australia, Chile, Japan and Vietnam — will not be affected by the new tariffs.

Buenrostro said Tuesday that the government’s aim is to “prevent unfair competition.”

“We have seen a lot of products coming [into the country] … at a very low price and displacing our national producers,” she said at a Council of the Americas event in Mexico City.

“… The prices for the public don’t go down, but [cheap imports] are displacing textile makers, footwear makers [and other manufacturers],” Buenrostro said.

The economy minister said that the imports of concern come from countries with which Mexico doesn’t have trade agreements. She didn’t specifically mention China but did say that the “undervalued” imports mainly come from Asia.

The government’s decree said that the decision to implement the tariffs — most of which were set between 25% and 35% — was made in consideration of a range of things, including the need to “provide certainty and fair-market conditions to all sectors that face situations of vulnerability, in order to allow the recovery of national industry, promote its development and support the internal market.”

It also said that the federal government has an “obligation to implement the necessary mechanisms that generate stability in national industry sectors and that allow trade distortions to be eliminated.”

In addition, the decree said that “due to the growing implementation of new trade models at the global level, such as the case of relocation (nearshoring), … it is necessary to implement concrete actions that allow a balanced interaction in the market, to avoid economic distortions that could affect the relocation of productive sectors that are considered strategic for the country.”

The government also said that the tariffs were aimed at “maintaining the competitiveness of the most sensitive industrial sectors, such as the electric, electronics, automotive and auto parts” industries.

The tariffs’ implementation comes after the Economy Ministry last month imposed tariffs on steel nails and steel balls from China.

López Obrador said in late March that steel-related issues were not weighing on Mexico’s trade relationships with the United States and China, and asserted that the government didn’t want to get involved in any kind of “war, not even a trade one.”

He also said that Chinese investment in Mexico — which has been on the rise — “will continue.”

‘For China, with dislike’

In an opinion piece headlined “For China, with dislike: 544 tariffs,” the newspaper El Economista’s editorial director Luis Miguel González argued that Mexico’s implementation of the 5% to 50% duties was motivated by its desire to not upset the United States.

“In the marriage between Mexico and the United States, there is no place for a Chinese lover,” the economist and journalist began his column, published Wednesday.

“With a magnifying glass, Uncle Sam is reviewing Mexico’s relationship with the dragon. Our main trade partner has become increasingly possessive. It asks us for ‘proof of love’ over and over again. It offers us nearshoring as a prize,” González wrote.

He wrote that the United States has become “very demanding,” noting that U.S. Secretary of the Treasury Janet Yellen earlier this year “asked Mexico to create an authority to review foreign investment that arrives to Mexico.”

González also pointed out that U.S. Trade Representative Katherine Tai raised concerns about the possible entry to the United States of Chinese steel “disguised” as Mexican steel, and that Donald Trump “threatened to impede the entry of Chinese cars [to the U.S.] if they’re made in Mexico.”

“The demands don’t stop, and the Mexican government doesn’t want to place its marriage at risk. It’s doing the right thing. In that sense, we can understand the Economy Ministry’s recent decision to impose tariffs on 544 products, among which are footwear, plastic, electric material, musical instruments, furniture … and steel,” he wrote.

González noted that the Economy Ministry has been “careful” in its use of language by not specifically mentioning China, saying only that the tariffs would apply to imports from countries with which Mexico doesn’t have trade agreements.

“Why do we know that the measure refers to China? A clue … is that the majority of affected products … [are] considerable imports from China. … The highest tariff, of 50%, corresponds to products made with steel,” he wrote.

The El Economista managing editor noted that the new tariffs’ implementation was applauded by Mexico’s Confederation of Industrial Chambers, which said in a statement that the move “doesn’t constitute a protectionist measure but rather a necessary action to create a ‘level playing field'” by combating “unfair practices like dumping and subsidies.”

In closing, González questioned whether the U.S. will be satisfied with the “proof of love” Mexico is offering.

A partial answer will arrive “in the coming weeks,” he wrote without elaborating on that prediction.

“It’s not a matter of Republicans or Democrats. Biden and Trump can be like water and oil on many issues, but on trade, they’re both protectionists, and on … China they share the diagnosis [that] it is Uncle Sam’s main competitor for global economic hegemony,” González said.

He noted that former Economy Minister Ildefonso Guajardo, now a member of presidential candidate Xóchitl Gálvez’s campaign team, has predicted that China will be “the main issue” when Mexico, the United States and Canada review their free trade agreement, the USMCA, in 2026.

“Continuing the amasiato [concubinage or partnership] with the dragon appears difficult,” González wrote. “Are we prepared to uncouple ourselves from China, even just a little bit?”

With reports from El Economista and Reforma

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Three officials said to be “familiar with the matter” told Reuters that the government is not offering Chinese EV makers incentives such as low-cost public land or tax cuts.

The sources said that the move was the result of pressure from the United States government, in particular the Office of the U.S. Trade Representative (USTR).

The United States government is determined to protect the U.S. EV industry from comparatively cheap imports, and reportedly has concerns about the capacity of Chinese “smart cars” to collect data and thus compromise national security.

On Wednesday, Trade Representative Katherine Tai said that the United States must take “decisive” action to protect U.S.-made EVs from subsidized Chinese car makers.

A bipartisan group of United States lawmakers wrote to Tai last November in part to request that the U.S. government be ready to “address the coming wave of [Chinese] vehicles that will be exported from our other trading partners, such as Mexico.”

In December, Mexico and the United States reached an agreement to cooperate on foreign investment screening as a measure to better protect the national security of both countries. The agreement was widely interpreted as a means to stop problematic Chinese investment in Mexico.

A White House spokesperson told Reuters that United States President Joe Biden will not allow Chinese car makers to flood the U.S. market with vehicles that pose a threat to national security.

Incentives for foreign car makers have been generous in the past 

Francisco Bautista, a partner at professional services firm EY in Mexico, told Reuters that the Mexican government has previously offered generous incentives to automakers, including free land, water and energy facilities and assistance to hire workers.

He said that such incentives have declined during the government led by President Andrés Manuel López Obrador, who took office in late 2018, although they have been offered to large investors such as Audi.

Several Chinese car makers have announced plans to manufacture in Mexico 

No Chinese car maker currently has a plant in Mexico, but several have announced plans to make vehicles here. They include BYD — the world’s leading EV company by sales — Jaecoo and Jetour.

BYD Americas CEO Stella Li said in February that Mexican officials had been receptive to the company’s plan to open a plant in Mexico, despite the concerns of the United States government and U.S. automakers. She said that BYD’s plan was “to build the facility for the Mexican market, not for the export market,” but there is skepticism about that remark.

Reuters’ Mexican government sources said that the last time top officials met with a Chinese automaker was in January when they spoke with BYD executives. The same month, U.S. officials asked their Mexican counterparts to “hinder Chinese automakers,” Reuters said.

The news agency’s sources, who asked to remain anonymous, said that Mexican officials made it clear to BYD that the government would not offer incentives such as those provided in the past. In addition, the sources said that the officials told the BYD executives that future meetings with Chinese automakers would be put on pause.

Reuters said that López Obrador’s office didn’t immediately respond to a request for comment on the issue, while the Economy Ministry declined to comment.

After Donald Trump said last month that he would impose a 100% tariff on cars manufactured in Mexico by Chinese companies if he wins the upcoming U.S. presidential election, López Obrador said that Chinese investment in Mexico is “safe” and will continue.

One Mexican official told Reuters that in the absence of federal incentives, BYD would seek state government ones, although they are typically not as generous.

Reuters said that states including Durango, Jalisco, Nuevo León and México state are all attempting to lure Chinese automakers and are consequently offering a range of incentives.

More on the United States’ concerns

A USTR official told Reuters that the USMCA, the North America free trade pact that superseded NAFTA in 2020, was not meant to “provide a back door to China and others who may be seeking to access our market without paying … tariffs.”

The U.S. automotive industry, including unions, and the U.S. government are concerned that Chinese car makers could export vehicles made in Mexico to the U.S. without paying the 27.5% tariff that is currently applicable to Chinese cars.

“Chinese automakers can get around U.S. tariffs by setting up shop in Mexico, as long as they meet rules for how much of a vehicle must be produced locally,” Reuters reported.

Dozens of Chinese auto-parts manufacturers already operate in Mexico. Chinese car makers could source inputs from them and other Mexico-based companies to ensure that they comply with the USMCA requirement of having at least 75% of core vehicle parts originating in North America.

Reuters reported that Mexico “is caught in the crossfire between the world’s two biggest economies and car markets.”

There is certainly the potential for Mexico’s trade and investment relationship with China to cause problems in Mexico’s bilateral relationship with the United States.

But López Obrador appears to believe that Mexico under his leadership is managing its relationships with both countries successfully. He said in late March that Mexico has “very good” trade relationships with both China and the United States when commenting on steel-related issues that have concerned the U.S.

Mexico has imposed tariffs on some Chinese steel products amid concerns in the United States about an increase in steel exports from Mexico, a move that was possibly the result of U.S. pressure, although Economy Minister Raquel Buenrostro asserted that Mexico is not receiving exports from China only to ship them north of the border.

Meanwhile, Chinese investment in Mexico is on the rise, and is almost certain to increase in coming years.

Reuters’ sources said that while Chinese investment benefits the Mexican economy, the federal government is worried about upsetting its U.S. counterpart ahead of the scheduled review of the USMCA in 2026, when the three parties will decide whether to extend the agreement for an additional 16 years.

S&P Global said in a recent report that “Chinese investment and exports to Mexico are highly likely to become a headline issue ahead of the 2026 scheduled review of the USMCA.”

One source told Reuters that Mexican officials are afraid that the U.S. government could seek to overhaul the pact to Mexico’s detriment.

Mexico will have a new president when the review takes place, while either Biden or Trump — barring a circumstance that precludes them from holding office — will be in the White House.

With reports from Reuters 

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Compared to the first quarter 2023, Guadalajara added 102,000 square meters of new industrial space, of which 70% is currently vacant. 

According to Solili, the average rental price per square meter in Guadalajara in 2024 is US $6.40, an increase of US $0.80 compared to last year.  

The demand was mainly driven by companies in the logistics, parcel and household appliances sector, the real estate analysts reported.

Nearshoring has been credited with driving demand for industrial real estate space in Mexico. In 2023, more than 350 industrial projects totaling 5.6 million square meters were built in Mexico, driven by companies relocating to Mexico. 

In many parts of Mexico, the demand is outstripping supply. Mexico City-based real estate fund Meor recently reported that nationwide, less than 2% of available industrial space is currently vacant, while the figure in the northern region is close to 0%.

Sergio Ríos, former director of investment for the Jalisco Economic Development Ministry (Sedeco), said that if Jalisco develops enough industrial parks to meet demand, it could capture between 30% and 35% of the foreign investment that will come into the country through nearshoring over the next five to six years. Without sufficient industrial space, however, Jalisco would only be positioned to receive 10% of this foreign capital, he explained.

“It will all depend on covering the need for physical spaces with an industrial purpose, that is key,” he said during a recent conference on nearshoring and its opportunities for Jalisco.

Ríos added that due to a shortage of industrial spaces in Jalisco, foreign direct investment in the state declined by 30% last year compared to 2022.

According to data from the federal Economy Ministry (SE), Jalisco was fourth in a list of states receiving the most foreign direct investment (FDI) in 2023, amounting to US $2 billion — 6% of the country’s total FDI. Jalisco came after Mexico City (31%), Sonora (8%) and Nuevo León (7%). 

In 2023, the United States was Jalisco’s top investor with US $777.2 million, followed by the United Kingdom with US $588 million and Germany with US $390.2 million.

With reports from El Economista

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Nearshoring vs Reshoring

Those of us who follow international and economic news are probably familiar with the words “nearshoring” and “reshoring,” both of which gained traction after the 2020 economic and public health crisis and the commercial and geopolitical disruptions that followed. Those trends consist in bringing supply chains “home,” and are part of a larger worldwide shift towards deglobalization that came about after the crisis of 2008-2009. 

Of the two, nearshoring has a more open approach and seeks to bring supply chains home to a region, not just a country. That region, however, needs to meet certain requirements: the countries in that region need to be close not just geographically but politically and, most of all, in terms of commercial allyship. Close ties are fundamental. By contrast, reshoring usually refers to the action of bringing back supply chains to a specific country.

For Mexico, nearshoring represents an exciting opportunity. It’s seen as a path to further integration with North America, which would not only result in higher trade flows with the United States and Canada but also in a higher exchange of knowledge and skills and an advancement in our productive capabilities which — using those new skills — could be modernized.

If nearshoring materializes fully, it could mean another economic boost for Mexico, in the vein of what the country saw after the North American Free Trade Agreement (NAFTA) took effect in 1994.

How has nearshoring affected Mexico’s economy?

So far, Mexico has seen some encouraging results.

In 2023, foreign direct investment (FDI) linked to nearshoring spiked 93% compared to 2022 — namely investment directed to sectors like automotive production, pharmaceutical products and semiconductors, among others with ties to global value chains.

That performance compares quite positively with the (-)31% year-over-year decline seen in FDI flows directed to other areas of the economy, such as the telecommunications and financial sectors.

Foreign investment directed to automobile and truck manufacturing — the largest nearshoring-related sector in the country — increased by 72% during that period. For activities related metal ore mining, also integrated into global value chains, FDI inflows almost tripled. 

The country has also had a high number of new investment announcements: since the beginning of 2021, just when nearshoring was beginning to gain traction, over a hundred new investment projects associated with it have been announced in Mexico, with a total estimated investment of more than US $30 billion. Even if some of them fall through — currently, about 43% of those projects are still in the announcement stage — six out of every 10 projects are either already operational or under construction.

Large investment sums are expected to continue to arrive in the coming years. It would seem, then, that we’re capitalizing on the opportunity.

Is Mexico realizing its full potential?

However, as is often the case in Mexico — in its economic growth, its fight against poverty and its efforts to reduce inequality, to mention a few instances — it also looks like we’re not really reaching our full potential. Even though Mexico seems to be thriving as an FDI host, it pales in comparison to the FDI inflow growth seen in other countries.

When we look at the results seen in Brazil, for example, we see a year-over-year increase of 70% in FDI reception between 2021 and 2022; in Chile, that same figure was 50%. Both countries are located in Latin America, yet both have higher increases than Mexico, where FDI inflows grew 12% in the same period. Additionally, Brazil’s FDI more than doubled that of Mexico in 2022, even though it was only 0.4% higher back in 2020.

What is Mexico doing wrong? Why is its FDI not increasing at the same rate as that of other countries? The answer doesn’t necessarily lie in what the country’s doing wrong, but in what it’s failing to do. 

Mexico needs a strategy, not assumptions

When the world and the United States started thinking about nearshoring, many in Mexico assumed that we would naturally be included as an integral part of the puzzle. We assumed that, due to Mexico’s geographical and cultural closeness with the U.S. and its participation as a partner of one of the largest, most comprehensive free trade agreements in the world, the United States-Mexico-Canada Agreement, we’d be prioritized as an ally in the effort to create more resilient supply chains. 

That mindset has led to a lack of strategy or efforts aimed at becoming the most competitive and convenient ally for North America. Consequently, we haven’t yet done the work needed to ensure that we have the necessary infrastructure in terms of electricity and water, housing and connectivity, and we’ve neglected our compliance with trade commitments, including those contained in USMCA. 

Every relationship requires work, and maintaining our close ties to our North American partners is not the exception; without that work, it’s irrational to think that we’ll naturally take precedence over other countries.

The danger in assuming that we’ll be prioritized without having to make an effort to become more competitive is that we could let the nearshoring opportunity pass without leveraging it to boost growth and economic development. If we don’t want that opportunity to come and go — and if we want to be considered as part of the North American “home” that the United States wants to bring supply chains back to —we need to do the work.

Foreign Trade and Labor Market Coordinator at the Mexican Institute for Competitiveness (IMCO) Ana Bertha Gutiérrez is an economist trained at the National Autonomous Technological Institute (ITAM), the University of California at San Diego, the Harvard Kennedy School of Government, and the Organization of American States. Previously, she was Research Coordinator for México, ¿cómo vamos?, an NGO focused on tracking national and state economic figures.

Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the views of Mexico News Daily, its owner or its employees.

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