Mexico's pitch for companies considering the American market was simple. Worried about vulnerable supply chains? Do you want to reduce your dependence on China? Do you want a cheap place close to the United States with favorable trade rules? Try Mexico.
Thousands of companies, from family businesses to powerful brands, in Asia, Europe and elsewhere, have done that exactly in recent years. Adidas, Samsung, Honda, Hyundai, Nestle, Volkswagen, Volvo, LEGO and more industrial parks of the Mexico public.
That parade has grown after pandemic-related supply chain nightmares and increasing political tensions between the United States and China. Canada – an important partner in the North -American production network – has also benefited. Last year Honda announced plans to invest around $ 11 billion in new electricity and battery production factories in Ontario, in addition to its existing facilities. Toyota and Volvo also have plants in Canada.
But now President Trump's decision to impose a rate of 25 percent on goods from Mexico and Canada – and 10 percent on importing Canadian energy – in the summer of companies as a freak -ice storm.
“If you are an investment officer in a C-suite, how do you determine where you will place money?” asked Mary E. Lovely, a senior fellow at the Peterson Institute for International Economics in Washington.
President Trump himself signed a new trading pact with Mexico and Canada in 2020 during his first term. Now he is in fact lifted that contract.
It is disorienting for every company, Mrs. Lovely said, because trade agreements are intended to create “safe spaces” for long -term investments.
In an executive order on Saturday, Mr. Trump also imposed new rates of 10 percent for import from China.
So far, other Asian and European trading partners have escaped the first round of the deadlines of presidential trade.
Yet they still have to brace themselves for the unexpected fall -out of rates on Mexico and Canada.
Only Japan has more than 1,300 companies that are active in Mexico, with more than half of them in the production sector. Some are car suppliers who moved China's production during the first term of Mr Trump, when he started a trade war with Beijing. In November the Japanese Toyota said it would invest another $ 1.45 billion in his two Mexican plants.
There are more factories on the way. In October, the Taiwanese electronics giant Foxconn announced plans to build a mega factory in Mexico to produce Nvidia chips.
“It is ironic, because there was such a reaction to the first rates to restructure the supply chains, and now you are actually the countries that have benefited from that adjustment,” said Albert Park, chief economist at the Asian Development Bank.
At Honda a director said there was a feeling of disbelief when Mr. Trump warned of rates for goods, not only from Mexico, where Honda operates a car factory in Celaya, but also from Canada.
Mexico is the largest exporter of car parts to the United States. For example, Honda produces around 200,000 vehicles in Mexico and ships around 160,000 of those to the United States. American car manufacturers such as General Motors and Ford Motor, which have large factories in Mexico and Canada, would be influenced by rates in the same way.
In a press conference in November, Honda's Executive Vice President, Shinji Aoyama, said that long -term rates would be discouraging. “Can companies actually stop producing in Mexico?” he asked. “That is really hard to do.“
Mexico is also the home of other large manufacturers who make space equipment, electronics, household appliances and more. It is the largest exporter of medical devices to the United States.
Hundreds of Chinese companies, including the electronic manufacturer Lenovo and the car manufacturer Chery, have also been migrated to Mexico in the hope of circumventing rates. BYD, the leading company of China, has an explanation of a production location in the country.
All these companies from Asia, Europe or the United States Zouden also have to contend with added tasks on components that they import from China, which remain the source of many of the parts, tools and equipment.
Mr. Trump said that the most recent rates were intended to stop the flow of migrants and fentanyl. However, a goal in the longer term is to put pressure on companies to build more plants, not only near the coast of America, but also to them.
“Come and make your product in America,” Mr Trump said this month in a speech on television to the World Economic Forum. If not, “you just have to pay a rate.”
Many companies have already done that. Some were a reaction to endangered rates; Others to change trading patterns.
Last year, Reckitt, a British company, mentioned Shipping Logjams for his decision to shift a production of Mucinex-the best-selling freely available medicine in the United States to North Carolina of Mexico and Great Britain. After the pandemic had disrupted the cold and flu season and led to low supplies, the company wanted to ensure that it could get Mucinex in shopping boards faster.
The LEGO of Denmark, the world's largest Toymaker, has his largest factory site in Mexico. In 2022 it announced that planning to build a facility in Virginia. The reason, LEGO said, was to shorten his supply chain and get closer to transport hubs on the east coast.
In 2017, Toyota promised to invest $ 10 billion in US production for more than five years, shortly after President Trump threatened to give rates against the company during his first term. Toyota is building a facility for the production of batteries in North Carolina and in 2021 it opened a vehicle factory in Alabama that works with Mazda.
Mr. Trump's last threats are again to consider companies their options. Among them are two South Korean electronic giants.
LG Electronics and Samsung Electronics both consider moving part of their production from household appliances to the United States, according to local media reports. (Spokespersons for both companies refused to comment.)
Mazda, who sends about 70 percent of the vehicles that makes it to the United States in Mexico, said it could move part of that production to the Alabama factory that runs together with Toyota.
For many companies, however, moving a large part of production to the United States is unrealistic, said Agathe Demarais, a senior policy fellow at the European Council for Foreign Relations.
The costs are too high. American employees are not willing to accept the low wages that companies initially encouraged to move to countries such as Mexico.
Mazda and Toyota are already struggling to increase production in their joint American factory due to a lack of employees.
Nowadays, Mrs. Demarais said, large companies can do their best to stay under the radar and wait for Trump's period. Opening a major production facility costs billions of dollars and a lot of time.
And managers can be wary to invest in the United States when the policy is so unpredictable. Last week, for example, the president unexpectedly increased the possibility to double taxes on foreigners and companies.
What is more important, Mrs. Demarais said, is that companies recognize that global trade is increasingly organized around trade routes that reflect the growing rivalry between the United States and China – such as the regional that concerns Mexico and Canada.
“That is a structural trend that will survive Trump,” she said.
Meaghan Tobin Bring reporting from Taipei, Taiwan.
