Chinese Manufacturers Heading to Mexico Overlook Potential Costs

To counter the recent US tariffs on Chinese imports such as steel, semiconductors and electric vehicles, Chinese manufacturers have begun establishing factories in Mexico to mitigate the added costs. Although proximity to the US and the tariff-free US-Mexico-Canada Agreement offer potential benefits, Chinese manufacturers face significant challenges, including language barriers, security issues, power outages, water shortages and demanding labor conditions. Without proper preparation for these obstacles, achieving profitability in Mexico is difficult. Additionally, in a market where demand outstrips supply, Mexican suppliers may not prioritize new Chinese clients. To improve their chances of success, Chinese investors should consider localizing their operations by promoting Mexican employees to senior positions, as a lack of local representation in leadership can deter potential employees.