Tariffs on imports from China have been a cause of concern for U.S. manufacturers as of late. These taxes have led to shrinking revenue and have created a financial uncertainty that could greatly affect the future of many of these businesses.
However, Mexico has the potential to benefit greatly from these rising costs as U.S. manufacturers are considering bringing back their companies to North America. This would place Mexico in the optimal position to secure many of these manufacturers for offshore operations.
Your international manufacturing experts at El Grande Group have the solutions you need to take full advantage of the current situation.
Manufacturers Planning Ahead
Tariffs are not the only issue lending themselves to this manufacturing exodus. Labor costs have been steadily rising in China while wages and labor costs in Mexico have continued to decline. When coupled with the tariffs and current political atmosphere, global manufacturers have made the right choice by moving their operations into Mexico.
The industries these manufacturers are arriving from are all across the spectrum and include notable names such as:
Source: NIKKEI Asian Review
But auto and electronic industries are far from being the only sectors investing in developing their manufacturing operations in Mexico. Research completed by McKinsey & Company shows that the competitiveness of the textile and garment manufacturing industries, coupled with changes to Western markets, changes caused by online retail, and a number of other consumer-driven factors, have made nearshore manufacturing essential for apparel companies who want to stay successful.
U.S. apparel companies that move the production of basic jeans from China into Mexico can maintain or slightly increase their margin while saving on freight and duties.
Interestingly, even Chinese companies have begun to expand their manufacturing operations into Mexico in order to gain access to new markets throughout Europe, Asia, and the Americas, as well as to avoid U.S. tariffs.
The Benefits of Manufacturing in Mexico vs. China
Taking advantage of the economic benefits of moving your manufacturing operations offshore into Mexico means:
- USMCA Benefits: The newly signed USMCA promises manufacturers within the three countries a variety of benefits such as duty-free exporting, minimized tariffs and import fees, as well as decreased shipment fees as a result of location. The Mexican manufacturing experts at El Grande Group can help to ensure you meet the standards and qualifications to reap the largest amount of benefits from the USMCA.
- Lower Production Costs: As previously mentioned, competitive labor costs have helped to give Mexico an edge in terms of production costs, but this is far from the only savings. Reduced shipping costs, potentially lower raw material costs, ease of access to U.S., Canadian, Mexican, and South American markets, as well as over 50 free trade agreements with nations from all over Europe, South America, Africa, and Asia, means plenty of opportunity for growth and increased revenue.
- Protection for Intellectual Property: There has been frequent concern about the Chinese government’s ability to provide intellectual property protection in various industries; the USMCA has set to ensure that companies manufacturing in Mexico will have full protection of their intellectual property.