Caixin Weekly | From Fervor to Caution: Investment in Mexico Enters Version 2.0 Era (AI Translation)
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文｜财新周刊 李蓉茜 余聪 刘沛林 包云红
By Caixin Weekly's Li Rongxi, Yu Cong, Liu Peilin, Bao Yunhong
文｜财新周刊 李蓉茜 余聪 刘沛林 包云红
By Caixin Weekly Li Rongxi, Yu Cong, Liu Peilin, Bao Yunhong
美国当选总统唐纳德•特朗普（Donald Trump）已经迫不及待地向邻国挥舞关税大棒，近岸贸易最大供应国墨西哥，已对来自中国的产业投资凸显新风险。
U.S. President-elect Donald Trump is eager to brandish the tariff stick at neighboring countries. Mexico, the largest supplier for nearshore trade, is already highlighting new risks associated with industrial investments from China.
2024年11月25日，特朗普在自己的社交网站Truth Social发文，预告将在2025年1月的首批行政令中，向墨西哥和加拿大所有进入美国商品征收25%关税，理由是推动边境安全，打击两国向美国“输入”芬太尼；而因同样原因被指责的还有中国。特朗普威胁称，要在目前关税基础上向中国加征10%的关税。
On November 25, 2024, Donald Trump posted on his social media platform, Truth Social, announcing plans to impose a 25% tariff on all goods entering the United States from Mexico and Canada as part of his initial executive orders in January 2025. The rationale for this move is to enhance border security and combat the "import" of fentanyl from these countries into the U.S. China was also accused of similar claims, with Trump threatening to levy an additional 10% tariff on Chinese goods atop the existing tariffs.
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- President-elect Trump plans to impose a 25% tariff on imports from Mexico and Canada, and a 10% additional tariff on Chinese goods, aggravating trade tensions.
- Mexico's exports to the U.S. significantly grew amidst China's investments, but Trump's tariff policies create uncertainty, especially affecting industries like automobiles.
- E-commerce, electronics, and mobile phone sectors are growing in Mexico with increased Chinese investments, but face infrastructure and regulatory challenges.
Donald Trump, upon announcing plans to levy a 25% tariff on imports from Mexico and Canada, aimed to bolster border security and address issues such as the fentanyl crisis while threatening additional tariffs on Chinese goods[para. 1]. Such movements align with Trump's past rhetoric and potentially disrupt the trade dynamics among the largest U.S. trade partners—Mexico, Canada, and China[para. 2]. Notably, China has increased investments in Mexico, with Chinese exports to Mexico reaching historical highs by the first quarter of 2024, and Chinese investments surging nearly tenfold compared to 2020[para. 3][para. 4].
Mexico, with its substantial market size, presents opportunities for Chinese businesses especially in sectors like automotive and mobile phones[para. 5][para. 6]. The entry and success in the Mexican market by companies like SAIC Motor, Chery Automobile, and Xiaomi have underscored emerging potentials despite Trump's trade policies creating uncertainties[para. 7][para. 8]. As investment slows in 2024 due to policy shifts, macroeconomic and geopolitical uncertainties could hinder future growth[para. 9][para. 10].
The U.S., Mexico, and China are all grappling with trade policy changes. With Mexico imposing tariffs on various goods and the necessity to renegotiate the USMCA, the geopolitical landscape further complicates trade relationships[para. 11][para. 12]. These tariffs are mainly targeting Chinese goods, indicating geopolitical strategies at play[para. 13][para. 14]. The new Mexican President, Claudia Sheinbaum, seeks alignment with the U.S. and Canada before revising the USMCA, reflecting shifting alliances and priorities[para. 15].
The changing investment environment is amplified by rising costs, infrastructural inadequacies, and political uncertainties, making Mexico a less attractive hub for Chinese investment[para. 16][para. 17]. The country's historical ties and corruption issues compound these challenges, making it difficult to emulate the success of Asian manufacturing models[para. 18].
The automotive industry faces unprecedented impact from intended tariffs, with Trump threatening up to 200% tariffs on imported Mexican cars[para. 19][para. 20]. Tesla's halted Mexican project manifests these uncertainties, which likewise affects related supply chains[para. 21]. Despite possible adverse conditions for firms like SAIC and BYD, the competitive pressure from the U.S. sees Mexico as a vital yet challenging juncture[para. 22][para. 23]. With trade stability concerns, companies face choices between direct exportation versus local manufacturing under uncertain tariffs[para. 24].
Mobile phones, another high-value sector, demonstrate resilience and growth. Chinese brands like Xiaomi and OPPO have successfully penetrated the Latin American market via Mexico, benefiting from regional trade agreements despite competing against established giants like Samsung and Motorola[para. 25][para. 26]. Securing substantial market shares against dominant players affirms China's push into Latin America, albeit facing challenges in scaling up beyond price-based competition[para. 27].
Cross-border e-commerce reflects a promising yet complex arena. The market potential in Mexico, tapped by Chinese platforms like SHEIN and Temu, is counterbalanced by inadequate logistics, high compliance costs, and a convoluted regulatory environment[para. 28][para. 29]. Trump's tightened immigration could further strain Mexico's social and economic landscape, impacting consumption and e-commerce dynamics[para. 30][para. 31].
Overall, while Mexico remains a pivotal trade partner and strategic nearshoring avenue for China amidst evolving U.S. policies and political reshuffles, infrastructure limitations and diplomatic uncertainty present significant hurdles. The landscape demands adaptability from businesses navigating this complex intercontinental space, while opportunities persist for those aligning with local conditions and consumer markets[para. 32][para. 33].
- SAIC Motor
- SAIC Motor is highlighted in the article as one of the prominent Chinese automotive companies performing well in Mexico's market. In the first three quarters of 2024, Mexico was the second-largest destination for China's automotive exports, just after Russia. SAIC Motor and other Chinese car makers are expanding their presence in Mexico, though none have officially disclosed plans for establishing a local car manufacturing plant yet.
- Chery Automobile
- Chery Automobile is highlighted as one of the Chinese car manufacturers successfully expanding in the Mexican market. Alongside SAIC Group and Jianghuai Automobile, Chery is making significant strides with increased exports of vehicles and parts. These efforts position Mexico as the second-largest destination for Chinese car exports in 2024, following Russia.
- JAC Motors
- JAC Motors is highlighted for its operations in the Mexican market, where it has shown notable performance alongside other Chinese car companies like SAIC and Chery. Although planning to explore local production, JAC has yet to formalize any announcements regarding plant location or production plans in Mexico. The company faces a challenging environment amid potential tariff hikes and shifts in U.S. trade policy under Trump's administration.
- BYD
- The article mentions that BYD, a Chinese car company, is accelerating its presence in the Mexican market. BYD is noted among the Chinese automakers expanding into Mexico, alongside companies like SAIC Group and NIO. However, it does not provide specific details about BYD's investment or production plans in Mexico, only indicating its involvement in expanding market reach in the region.
- ZEEKR
- ZEEKR, a Chinese automobile company, is accelerating its entry into the Mexican market. The article mentions that as of 2024, ZEEKR is one of the Chinese car companies, alongside BYD, focusing on expanding their presence in Mexico's automotive market.
- Zhongce Rubber
- Zhongce Rubber announced in April 2024 an investment in a new factory in Mexico, located in Saltillo's Alianza Industrial Park in Coahuila state. The planned total investment amounts to $500 million, with an expected production commencement in 2025.
- Jindi Group
- Jindi Group, a precision machinery parts company, announced in April 2024 the establishment of a subsidiary in Mexico. By late October 2024, they finalized plans to build a factory in San Luis Potosí's Parque Logistik III industrial park, with an investment of $165 million.
- Foxconn
- The article mentions that Mexico has started collaborating with electronics manufacturer Foxconn, along with other companies, to identify products that can be produced locally instead of being imported from Asia, as part of increasing local production.
- Intel
- Intel is mentioned in the article as one of the companies with which Mexico has started collaborating to identify products that can be manufactured locally instead of being imported from Asia. This effort is part of Mexico's strategy to increase the proportion of localized production.
- General Motors
- General Motors has been involved in exporting vehicles made in China to the Mexican market, with sales exceeding 130,000 units in 2023. These exports represent nearly half of the Chinese-made vehicles sold in Mexico, illustrating General Motors' significant footprint in the region's automotive market.
- Tesla
- The article mentions that Tesla had initially planned to build a factory in Mexico, drawing investments from its Chinese suppliers. However, due to uncertainties from the U.S. elections, Tesla paused the construction of its Mexico factory and instead decided to produce its new models at its Texas plant. Tesla's CEO Elon Musk, who has a close relationship with Trump, has not yet revealed further plans for the paused Mexican project.
- Great Wall Motor
- Great Wall Motor is exploring local production in Mexico, though no official factory plans have been announced yet. The company may face challenges in its local operations due to Trump's proposed tariffs on Mexican imports, aiming to push manufacturing back to the U.S. Additionally, competition pressure increases as American automakers also consider shifting production from China to Mexico.
- Changan Automobile
- Changan Automobile entered the Mexican market in 2021, initially operating through a local distributor, and transitioned to independent operations in 2024. The company faces challenges due to Trump’s manufacturing policies and increased competition in Mexico, as more production moves from China to Mexico. Future investments in Mexico by Changan will focus on assessing whether capacity can meet investment return requirements.
- Xiaomi
- Xiaomi re-entered the Latin American market in 2018, with a focus on Mexico after initial challenges in Brazil. Collaborating with local telecom operators, Xiaomi's strategy involved aggressive price positioning, achieving rapid growth in several countries. By 2020, Xiaomi significantly increased its shipments, becoming a major smartphone brand in Latin America, second only to Samsung and Motorola. Its success has prompted other Chinese brands like OPPO and Vivo to follow suit in the region.
- OPPO
- OPPO entered the Mexican market in 2020, targeting the price-sensitive market with a focus on the mid-to-high-end segment. Partnering with América Móvil, they saw a 1035% increase in shipments in Q3 2020. They later established a dedicated Latin American business unit in Shenzhen and introduced the Reno series in Mexico, achieving significant market presence and 62% growth in Latin America in the first three quarters of 2024.
- vivo
- In 2020, vivo entered the Mexican market, following OPPO's footsteps in the third quarter. This move was part of a broader strategy by Chinese smartphone manufacturers to expand their presence in Latin America. The entry into Mexico marked a significant point in vivo's international expansion efforts in the region.
- Honor
- Honor is one of the Chinese smartphone brands that have re-entered the Latin American market, following Xiaomi's successful re-entry. These brands are actively expanding their presence in Mexico and other Latin American markets, joining competitors like OPPO and vivo.
- Transsion
- Transsion is mentioned briefly in the context of Chinese smartphone manufacturers entering the Latin American market. In the fourth quarter of 2020, Transsion, along with other companies like OPPO and realme, entered the Mexican market. The article notes the competitive landscape among Chinese brands as they expand their presence in Latin America's mobile phone sector.
- SHEIN
- SHEIN entered the Latin American market via Mexico in 2019. In early 2023, Marcelo Claure, a former COO at SoftBank, joined SHEIN as its Latin America business chairman and invested $1 billion. SHEIN has rapidly grown in Mexico by targeting its cost-conscious consumer base, aligning with the broader trend of Chinese e-commerce platforms expanding in Latin America.
- Delight
- The article does not specifically mention any information about "Delight." It focuses on various topics such as Trump's trade policies, Chinese investments in Mexico, and the impacts on different industries like automotive and electronics, but "Delight" is not mentioned within the context provided.
- 2018：
- Then-President Trump signed the framework for the United States-Mexico-Canada Agreement (USMCA).
- 2022：
- The U.S. introduced the concept of 'friendshoring'.
- 2023：
- Mexico's exports to Mexico reached $81.47 billion, marking a 127% increase compared to pre-U.S.-China trade war figures in 2017.
- April 23, 2024：
- Mexico imposes temporary import tariffs ranging from 5% to 50% on 544 categories of goods.
- August 2024：
- Zhongce Rubber held a groundbreaking ceremony for its new plant in Mexico.
- October 2024：
- Donald Trump emphasizes plans to impose tariffs of 100% or even 200% on cars imported from Mexico.
- End of October 2024：
- Kingclean Electric finalizes plans to build a plant in Mexico with an investment plan of $165 million.
- First three quarters of 2024：
- Mexico became the second-largest destination for Chinese automobile exports, following Russia.
- First ten months of 2024：
- The total export value of China's exports to Mexico surged to $75.81 billion, marking a year-on-year growth of nearly 12%.
- November 25, 2024：
- Donald Trump announces plans to impose a 25% tariff on all goods entering the United States from Mexico and Canada, as part of initial executive orders in January 2025.
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