Despite recent threats of tariffs related to current immigration issues in the U.S., Mexico remains a solid contender for global organizations looking to mitigate tariffs in China, or simply diversify their supply chain.
According to Inbound Logistics, “Mexico is becoming an increasingly popular option for any and all manufacturing industries that want to mitigate costs without compromising quality.”
As a result, U.S. imports of Mexican goods rose 5.4% in the quarter from the year-earlier period, while imports of Chinese goods were down nearly 15%, according to U.S. Census Bureau data.
Traditionally known for automotive, aerospace and electronics, more recently, manufacturing and assembly of office furniture, stamping and metal mechanics, and textiles (industrial applications) has emerged.
According to Inbound Logistics, “Mexico is becoming an increasingly popular option for any and all manufacturing industries that want to mitigate costs without compromising quality.”
As a result, U.S. imports of Mexican goods rose 5.4% in the quarter from the year-earlier period, while imports of Chinese goods were down nearly 15%, according to U.S. Census Bureau data.
Traditionally known for automotive, aerospace and electronics, more recently, manufacturing and assembly of office furniture, stamping and metal mechanics, and textiles (industrial applications) has emerged.
Examples of market movement include:
Companies like China’s Hisense, one of the world’s largest television manufacturers, is bringing more suppliers to Mexico as it aims to switch production of all U.S.-bound flat screen TVs to its largest plant outside of China. GoPro wants all of its U.S.-bound cameras to be in production in Guadalajara, Mexico, in the second half of the year as it seeks to insulate the firm against possible tariffs. Cosmetic Colors, a thriving Mexican producer of eyeliners and other cosmetic products, recently got a €7 million ($7.8 million) order from a European cosmetic giant for items that were previously made in China and faced a 25% tariff. The company’s high-end plant in the city of Toluca exports 85% of its products to the U.S. for the world’s top cosmetic brands. (Source: https://www.wsj.com/articles/trumps-mexico-tariff-threat-trips-up-manufacturers-shifting-out-of-china-11559478751)The advantages of considering Mexico vs. China include:
- Mexico follows similar Intellectual Protection laws as the U.S. and Canada
- Logistics advantages
- More compatible time zones for U.S. and Canada
- Lower travel costs
- Skilled workforce
- Reasonable labor costs
- Mexico’s exports on average contain about 35% or more U.S. parts, whereas Chinese exports contain far less, at about 4%. (WSJ 6/2/19)
So, why wouldn’t organizations want to manufacture in Mexico?
- Identifying new suppliers can be a slow process. Organizations wanting to quickly hedge tariff implications will likely encounter slower response times in communications.
- In many cases, the costs remain higher than if sourced in China or SE Asia.
- Government regulations, including labor requirements, can be challenging to work through.
