Bypassing Barriers: China’s clever use of Mexico to penetrate U.S. markets

China operates with a singular objective: to maximize profits, employing any means necessary. Recently, we have witnessed escalating tensions between the United States and China over trade relations. This conflict has significantly impacted the American market, prompting the U.S. government to impose substantial tariffs on Chinese goods imported into the country. However, China has ingeniously devised a strategy to circumvent these hefty tariffs while simultaneously reducing shipment costs.

Chinese companies utilize Mexico as a back door to enter the US amid the ongoing trade war with the US. Many Chinese firms have moved to industrial parks in northern Mexico over the past few years to get closer to the American Market. Market Manoa Furniture in Monterrey producing recliners and plush leather sofas that are fully labelled as made in Mexico is one of these companies. This relocation not only reduces shipping costs but also ensures their products are treated as Mexican-made, thus skirting US tariffs and sanctions on Chinese Imports. Yuken Wei, the company’s general manager told the BBC that relocating to Mexico was a strategic move for both economic and logistical reasons. Yu further said, “We are planning to Triple or even quadruple our production capacity here”. The company started operations in Monterrey in 2022 and has hired 450 workers in Mexico. They intend to expand their Workforce to over 1,200 in the next few years and to initiate multiple new production lines at the plant.

Mexico’s exports had increased by 5.8% year-over-year to $ 52.9billion this trend shows little sign of abating. Within just the first two months of this year Mexico’s capital investment nearly reached half of its total for all of 2020. Yet there are calls for caution with respect to Chinese Investments due to the potential for Mexico to be drawn into the wider geopolitical tensions between the US and China. Enrique Dussel of the Mexico China studies Center at the National Autonomous University of Mexico in his interview to BBC warned that –“irrespective of whether Donald Trump or Joe Biden is in the White House, few anticipate any possible improvement in the US-China relations over the next four years.”

Mexico must exercise caution to avoid becoming embroiled in the US-China geopolitical conflict. As previously last week informed Mexican official revealed to Reuters that under US pressure, Mexico is distancing itself from Chinese car manufacturers by not offering incentives for electric vehicle productions. Companies like BYD and SAIC motor are reportedly using Mexico as a loophole to sell inexpensive electric vehicles in the US. Thus avoiding tariffs of up to 27.5%, a US trade representative clarified that the United States Mexico Canada Agreement (USMCA) or new NAFTA was not designed to allow China tariff free market access.

Meanwhile, Dussel advised that Mexico should be wary of becoming a pawn in the US China geopolitical struggle especially as Washington places a high priority on National Security. With the USMCA set for re-negotiation in2026 Mexican officials are cautious about angering the US; fearing significant amendments to the agreement that could negatively impact Mexico. Political pressure is also mounting with former president Trump threatening a 100% tariff on ‘cars made in Mexican factories’ by Chinese companies if re-elected and the Biden administration pushing Mexico to prevent China from indirectly exporting metal products to the US.

This lucidly underscores that irrespective of the multitude of stratagems China deploys to permeate American markets, the United States possesses a profound comprehension of China’s tactics. Concurrently, Mexico, America’s contiguous neighbour, is still categorized as a third-world nation where advancement is merely notional, and political volatility has engendered substantial drug cartels, which have profoundly influenced the nation’s economy. Subsequent to China’s incursion into Mexico, in light of the ameliorating economic circumstances there, Mexico will be compelled to ensure that it does not detrimentally affect American interests in any manner. Because, in case, the diplomatic relations between America and Mexico deteriorate, Mexico will inevitably bear the repercussions, and in such a scenario, China will discreetly withdraw from Mexico and commence formulating a novel strategy to infiltrate the American market anew.

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