Man Wah Furniture’s recliners and plush leather sofas, produced at their Monterrey factory in Mexico, proudly bear the label of “Made in Mexico.” This strategic move allows the Chinese-owned company to bypass tariffs and gain entry into the US market through retailers such as Costco and Walmart.
Amid the ongoing US-China trade tensions, many Chinese companies have relocated to industrial zones in northern Mexico in recent years. This shift closer to the American market has proven beneficial for companies like Man Wah Furniture. Besides saving on shipping costs, their products are now considered entirely Mexican-made, enabling them to sidestep the tariffs and sanctions imposed on Chinese goods by the US.
Yu Kenwei, the company’s general manager, highlighted the economic and logistical advantages of the move to Mexico. He expressed ambitions to triple or even quadruple production output and expand the current workforce of 450 employees to over 1,200 in the coming years, along with setting up new production lines at the Monterrey facility.
The “nearshoring” trend is seen as a boon for the Mexican economy, with exports surging by 5.8% to $52.9 billion as of last June. This momentum shows no signs of slowing down, with reports indicating that capital investments in Mexico have already approached half of the total for the entire year of 2020 within just the first two months of this year.
However, concerns about Chinese investments have prompted calls for caution regarding Mexico’s involvement in the broader geopolitical tensions between the US and China. Enrique Dussel from the National Autonomous University of Mexico warned that regardless of whether it’s Donald Trump or Joe Biden in the White House, few expect any improvement in US-China relations over the next four years.
Recent reports revealed that under pressure from the US, the Mexican government has distanced itself from Chinese automakers by refusing to provide low-cost public land or tax incentives for electric vehicle production.
Chinese automakers including BYD, SAIC Group, Geely, Chery, and JAC Motors have reportedly used Mexico as a backdoor to sell cheap electric vehicles in the US without facing the hefty 27.5% tariffs.
American trade officials emphasized that the US-Mexico-Canada Agreement (USMCA) was not designed to offer a loophole for countries like China to enter the US market without paying tariffs. The use of Mexico as a manufacturing hub by Chinese companies has raised concerns about trade growth possibly being driven by importers trying to circumvent US tariffs.
Dussel suggested that “nearshoring” should be more accurately described as “secure outsourcing,” emphasizing the need for Mexico to remain vigilant in navigating its position amid the US-China dynamic. He cautioned that in the medium term, facilitating Chinese companies’ passage through Mexico could be detrimental to bilateral relations between the US and Mexico.
While Chinese investments can benefit the local economy, the Mexican government is wary of angering the US, especially with the revision of the USMCA slated for 2026. There are concerns that American officials may seek significant changes to the trade agreement that could harm Mexico’s interests.
During a campaign rally in Ohio in mid-March, former President Trump condemned China’s attempts to export cars to the US through Mexico. He vowed to impose new tariffs to prevent such imports if re-elected, stressing a tough stance on trade practices involving Chinese companies in Mexican automotive manufacturing plants.
The Biden administration has also applied pressure on Mexico, halting Chinese metal products from indirectly entering the US via Mexico to evade tariffs. President Biden mentioned during a rally in Pittsburgh on April 17 that he had sent a delegation to Mexico to address the issue, specifically targeting the flow of Chinese steel and aluminum through Mexico to sidestep tariffs.
By addressing the intricacies of trade relationships involving Chinese companies and Mexico, both nations are navigating a complex landscape where economic interests are intertwined with political dynamics, reshaping the global trade environment.