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One of the trends we at Mexico News Daily have covered closely is the large and accelerating amount of investment from China and its impact on multiple industries in Mexico.
The nearshoring trend is forcing companies in all industries to become “more local” and the Chinese are moving at the speed of light. The auto industry is just the tip of the iceberg of Chinese investment in Mexico, with recent months seeing significant announcements by Chinese companies in industries as diverse as furniture, electronics, solar power plants, tires and construction equipment. Became. .
I also wrote about this trend, providing a basic framework for why it’s important and how to think about it.
Some recent news in Mexico’s auto industry should add urgency to the discussion.
Just a few days ago, we reported that sales of Chinese cars in Mexico will increase by 63% in 2023 and now account for nearly 20% of all cars sold in the country. This is really a big deal!
And just a few days ago, another Chinese car company announced a major investment in a new electric vehicle factory in northern Mexico.
Given that automobiles and auto parts account for the largest share of USMCA trade and are perhaps the most successful example of cross-border cooperation and consolidation of agreements, such large-scale expansion of Chinese companies into Mexico is The idea of investment and growth is important and about the wake-up call.
So far, Chinese investment has been mainly in the auto parts sector, but there are all signs that an auto assembly plant will soon be built in Mexico. Given the speed of investment and growth, there are several important questions to consider.
How will other foreign auto companies investing in North America compete with Chinese auto companies? Will they start buying more auto parts from newly localized Chinese companies in Mexico to stay competitive and disrupt the current supply chain?
Last year, a bitter strike between the UAW and America’s “big three” automakers resulted in significant increases in wages and benefits for workers. How can these companies with factories in the US and Canada compete with Chinese cars made in Mexico?
Just this week, Tesla CEO Elon Musk said during the company’s quarterly earnings conference that, “If trade barriers are not established, Chinese EV companies will crush most of the world’s car companies.” Deaf,” he said.
How will politicians in the United States, Canada, and Mexico react? Will the US consider abandoning or modifying the USMCA free trade agreement to increase tariffs on Mexican-made Chinese cars to protect UAW jobs in the US and Canada? Will the US and Canada allow duty-free entry for Chinese cars made in Mexico? Will Mexico somehow try to find a way to cater to both Chinese car companies and US/Canadian politicians?
Mexico needs job creation and investment, but it is naive to think that such large-scale Chinese investment will not cause serious relationship problems between Mexico and the United States and Canada in the future.
The USMCA leadership cannot allow the issue of Chinese investment in Mexico to roll back or reverse the trade agreement that has greatly benefited North America over the past 30 years.
Unless politicians in all three countries quickly confront this issue head-on, it is hard to imagine that it will not lead to serious trade problems and ultimately become a major political issue later this year.
We need our leadership to focus on making North American cooperation stronger and more inclusive, rather than being sidelined or weakened by the disruption of Chinese investment. Of course, there are many other big issues in the region that currently need to be managed, but this is too important to ignore. Wake up North America!
Mr. Travis Bembenek mexico news daily I have lived, worked and played in Mexico for over 27 years.
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