Because the 2026 evaluate of the United States-Mexico-Canada Settlement (USMCA) approaches, rising Chinese language funding and manufacturing exercise in Mexico is reshaping North American provide chains — and elevating new questions on commerce compliance, tariffs and the way forward for cross-border freight.
Jorge Gonzalez Henrichsen, co-CEO of The Nearshore Co., mentioned the narrative that China is utilizing Mexico as a “backdoor” into the U.S. market is each correct and oversimplified.
“The reply to the query is sure and no… issues are for actual, and also you see it within the numbers… however the phrase ‘backdoor’ has a detrimental connotation,” Henrichsen instructed BigRig.
Chinese language corporations have considerably expanded their presence in Mexico lately, notably because the COVID-19 pandemic disrupted world provide chains. Henrichsen mentioned the shift has been pushed largely by U.S. corporations in search of to cut back tariff publicity and geopolitical threat tied to China.
“There was a spike, most likely since COVID, each in manufacturing services… and EVs is a giant, massive, massive… one thing that’s infamous,” he mentioned.
From tariffs to nearshoring — and adaptation
Relatively than exiting the U.S. market, many Chinese language suppliers have tailored by relocating manufacturing to Mexico, organising native entities and hiring Mexican labor to qualify for preferential commerce therapy below USMCA.
Henrichsen described one widespread situation: U.S. consumers chopping ties with China-based suppliers, solely to see those self same suppliers reemerge in Mexico.
“The Chinese language firm would say… ‘I’ll go to Mexico. I’ll turn out to be a Mexican firm,’” he mentioned.
Whereas some critics argue that minimal processing or relabeling may very well be used to avoid tariffs, Henrichsen mentioned most exercise falls right into a authorized grey space — or is totally compliant — as corporations work to satisfy rules-of-origin thresholds.
China expands investments in Mexico
Chinese language overseas direct funding (FDI) in Mexico has accelerated considerably since 2017, notably following the U.S.-China commerce battle and the implementation of the USMCA in 2020, which helped drive a brand new wave of manufacturing-focused funding, in keeping with the Federal Reserve Financial institution of Dallas.
Official knowledge present Mexico obtained about $2.3 billion in web Chinese language FDI from 2017 to 2024, although non-public estimates recommend the true determine may very well be a number of occasions greater, reflecting investments routed by means of offshore entities and greenfield initiatives.
One of many largest single investments was a $5 billion manufacturing facility from the China-based Lingong Equipment Group that was introduced in October 2023 within the Mexican metropolis of Monterrey.
Regardless of speedy development, Chinese language funding nonetheless lags far behind U.S. and different G7 international locations, accounting for less than a small share of complete FDI into Mexico at the same time as Chinese language corporations play an more and more seen position in nearshoring provide chains.
Financial upside — and rising stress
The inflow of Chinese language corporations has fueled industrial development throughout northern Mexico, boosting employment, manufacturing capability and provider improvement.
“I feel that kind of association could be very constructive for Mexico… they’re bringing… know-how in manufacturing… and that’s very constructive for the ecosystem,” Henrichsen mentioned.
Nonetheless, the pattern is creating friction. Mexican corporations face new competitors, whereas policymakers in each Mexico and the U.S. are below stress to deal with issues about Chinese language overcapacity and provide chain dependence.
Current discussions between U.S. Commerce Consultant Jamieson Greer and Mexican officers have targeted on tightening guidelines of origin, strengthening financial safety measures and aligning tariff insurance policies forward of the USMCA evaluate.
On the identical time, U.S. officers have signaled that tariffs — notably on autos and metal — are more likely to stay in place even after renegotiation.
USMCA evaluate: Tweaks, not overhaul
Henrichsen expects the settlement to outlive the 2026 evaluate however with significant changes, notably round guidelines of origin and enforcement.
“My forecast is that the USMCA will live on… however it is going to be tweaked… each to appease a few of the U.S. forces… and likewise to see real enhancements,” he mentioned.
Guidelines of origin are more likely to be a central battleground, as U.S. policymakers look to restrict Chinese language content material in North American items whereas preserving built-in regional provide chains.
Analysts say modifications may embrace stricter content material thresholds, enhanced enforcement mechanisms and larger coordination on tariffs and funding screening concentrating on China-linked exercise.
Funding slows amid uncertainty
Regardless of robust curiosity in nearshoring, corporations are taking a wait-and-see method as negotiations unfold, delaying main capital commitments.
“A number of the businesses… are saying, ‘you understand what, let’s wait a few months’… the suspense across the USMCA is making them wait,” Henrichsen mentioned.
Nonetheless, he emphasised that for a lot of producers — notably these serving the U.S. market — the long-term case for Mexico stays intact no matter coverage modifications.
“For some corporations… don’t wait… there’s nothing that’s going to occur that’s going to vary the construction… simply transfer quick and nearshore,” he mentioned.
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