Mexico Under the Countdown: New Logic and Unwritten Rules

"No matter what, new rules will always emerge." By Ren Qian, Ma Wen

Edited by Chen Zhiyan

With the 90-day U.S.-China tariff deadline looming, China's Ministry of Commerce officially announced on July 23 that the two sides would hold a new round of economic and trade talks in Sweden — a meeting widely seen as a critical indicator of where bilateral economic relations are headed.

The three-month "halftime" created a buffer for negotiations, but in the overlooked corners, smaller nations caught between the two great powers have long been knocked off balance.

Among the popular destinations for Chinese companies going global, Southeast Asia has undoubtedly been hit hardest. Mexico ranks second.

A classic transit hub for rerouting goods into the U.S. market, Mexico is China's second-largest trading partner in Latin America, and China has held the position of Mexico's second-largest trading partner for 20 consecutive years. Bilateral trade has grown at double-digit rates annually; the automotive sector in particular has surged — in 2024, Mexico became the sixth-largest destination for Chinese NEV exports, and ranked third in year-over-year export growth.

Under the influence of America's "nearshoring" strategy and the policy advantages of the USMCA, many Chinese firms had set up factories in Mexico through a transshipment model: "domestic parts + Mexican assembly + American market." This approach satisfied Washington's supply chain reshoring demands while keeping trade flows alive.

But under the blow of Trump's tariff bludgeon, Mexico's "China Plus One" geographic advantage faces unprecedented challenges. The IMF has slashed its 2025 growth forecast for Mexico from 1.4% to -0.3%, making it the only G20 economy projected to contract.

Also pushed into the ring are legions of companies going global — cross-border sellers tracking exchange rates at 3 a.m., "prophets" who sensed the danger and built overseas factories years ago, and factory owners who just paid deposits and now have no idea what to do. Faced with once-in-a-century upheaval, their joys and sorrows do not align.

Over the past two weeks, Anyong Waves partnered with Xianfeng Changqing, an early-stage fund focused on globalization, to host an online event with veteran operators who have spent more than a decade on the ground in Mexico. While many of the issues discussed have received scattered coverage, hearing them from firsthand participants reveals a situation more severe and complex than imagined.

Three things are certain:

First, nearly all companies believe they must go global; those still competing domestically will only be squeezed by larger players.

Second, the U.S. remains the best buyer in the world today — high margins, large orders, strong purchasing power. No one will abandon this market unless absolutely forced.

Third, who controls the new trade rules will be the central drama in the next phase of U.S.-China competition.

But no matter what, new rules will always emerge. As the famous line goes: "Today is brutal, tomorrow will be more brutal, but the day after tomorrow will be beautiful." So try not to die tomorrow night.

The following is an edited transcript of the live discussion, prepared by Anyong Waves:

Part 01

The "Mexico Opportunity" Under Tariffs

Manufacturing: Building an Overseas Supply Chain Is Only a Matter of Time

This year, a series of U.S. tariff policies have added considerable uncertainty to what was already a red-hot Mexico market.

Chinese companies that have recently invested in Mexican production are mostly in the automotive sector. "Some are Tesla suppliers, others are domestic Chinese automakers like BYD and Changan," said Yu Yuanwen, General Manager of Huamo Trade Mexico. With April's tariff war as a dividing line, many factories under construction have halted, and no new investment plans have emerged.

"Once people realize that even moving to Mexico might not exempt them from tariffs, that mindset alone dampens investment enthusiasm."

As one of the largest comprehensive service providers for Chinese companies entering Mexico, Jilian Group has felt this even more directly. Vice President Gao Jiageng told us that as early as Q3 2024, during the peak of Trump's campaign, enthusiasm among Chinese firms for building factories in Mexico had already dropped several notches. Most interested companies chose to wait and see the final election outcome.

"Several major corporate planning projects basically all stopped. The impact wasn't limited to automotive — it also hit other manufacturing and chemical materials companies." Some experienced CEOs judged that the U.S. would introduce even stricter restrictions and simply abandoned further Mexico investment.

In sharp contrast, however, Gao noted that inquiries about Mexican operations haven't declined. More manufacturers, with no prior globalization background, panicked and came to Latin America looking for factories and land right after the MAGA victory. But after May's tariff roller coaster, "these clients almost all vanished overnight."

The allure of overseas orders is enormous, but so are the investment amounts, with payback periods stretching years. This makes it hard for Chinese bosses to commit. So whenever U.S.-China trade shows signs of temporary easing, they promptly put their globalization plans on hold.

On July 12, Trump announced on Truth Social that starting August 1, 2025, the U.S. would impose 30% tariffs on Mexican exports — adding yet another variable to an already uncertain outlook for Mexico-bound companies.

Still, in the view of Yu Ke, General Manager of Minth Group's Global Logistics Center, it's not worth over-worrying about U.S.-Mexico trade risk. "Before Chinese companies arrived, Mexico was already a manufacturing powerhouse deeply embedded in the U.S. supply chain. America itself heavily depends on Mexican parts supply."

This is indeed the case. After February's tariff war, Trump quickly granted one-month tariff exemptions to the three major automakers including Ford. By May, U.S. Customs and Border Protection officially confirmed that Canadian and Mexican-made auto parts, as part of USMCA, would remain duty-free as long as they met rules of origin.

But the flip side is that since July 2023, Mexico has raised its own import tariffs three times. In Yu Ke's view, this strategy resembles China's earlier "two ends abroad" model — importing raw materials, processing them, then exporting finished goods, ultimately retaining tax revenue and employment locally.

"Clearly, the Mexican government wants to guide more foreign companies to invest and build factories locally, not to have you ship goods in, give them a quick rinse, send them to the U.S., and take the profits back home."

From this perspective, Chinese manufacturing firms seeking long-term development in Mexico must make corresponding adjustments.

This was the consensus among participants: For Chinese companies, building a second overseas supply chain is only a matter of time. In fact, many companies have become more decisive in their globalization moves after the tariff war.

On one hand, building overseas factories is a shared demand from core Western brands. Ford, GM, and BMW have required downstream suppliers to gradually shift supply chains, increasing local content ratios in Latin America, Eastern Europe, or Southeast Asia. Non-compliance risks expulsion from the entire system.

On the other hand, sustainable operations value policy certainty above all. "If a product's gross margin is 15%, companies want it to stay at 15%, not swing from 30% today to -10% tomorrow." Most participants agreed that since the external environment cannot be changed, it's better to focus on building international capabilities rather than gambling on four-year geopolitical cycles.

In Gao Jiageng's view, we have now reached a point where we need to bring China's efficient management methods, production experience, and even corporate culture to the world. "Even Latin American workers, stereotyped as less efficient, show noticeable improvement in quality and responsibility after Chinese company training. Subtly, we have already exported our values."

Cross-Border E-Commerce: For Now, Chinese Goods Remain Hard to Replace

Economically, Mexico is Latin America's second-largest economy, with 130 million people and per capita GDP of $13,000 — a consumer market equivalent to a smaller China, a rarity globally.

More importantly, Mexico's internet penetration has climbed to 86.51%, while e-commerce penetration sits at just 18%. This market structure of "low competition density + high consumption potential," combined with massive scale and rapid growth, has made Mexico a coveted prize for e-commerce giants. In recent years, beyond local Latin American leader Mercado Libre, Chinese platforms including SHEIN, Temu, and TikTok have all built local teams and poured enormous commercial resources into the market.

Because Mexican residents face strict restrictions on applying for foreign currency bank accounts, Chinese sellers generally rely on cross-border payment service providers to complete transactions. Yang Guoqiang, Business Director at Sunrate, told Anyong Waves that in recent years, Sunrate's cross-border collection and payment business in Mexico has grown rapidly. "From what we've observed, even merchants focused solely on the Mexican market can reach annual transaction volumes in the hundreds of millions."

Because it's relatively easy to make money there, whether in incubation or training, most newcomers to cross-border e-commerce choose Mexico as their first stop.

Kong Zhiqiang, CEO of J&T Express Mexico, candidly noted that J&T was struck by the high logistics costs when it first entered Mexico. At the time, local Mexican courier companies charged up to 300-400 pesos per shipment.

"We quickly realized that here, you don't need to slash prices dramatically to be more competitive than peers."

In his view, Mexico's high costs mainly stem from being at an early stage of industrial development. While loop belts and automated sorting have long been standard in China, Latin America still largely relies on manual sorting plus forklift loading. This means that introducing advanced equipment and management models can, to some extent, achieve dimensional reduction.

However, as global trade protectionism has risen, the booming Mexican market has inevitably been affected.

On January 1, 2025, Mexico's Tax Administration Service (SAT) announced adjustments to import parcel duties. The previous duty-free policy for certain low-value parcels was completely eliminated, replaced by a blanket rule: all goods from China, regardless of value, would be subject to 19% tariffs.

Since then, Kong has closely tracked changes in parcel volumes. "A sudden plunge in freight volume would definitely impact our operational network." Yet six months later, the expected crash never materialized.

The reasons are twofold. First, Mexico's high margins: under the first wave of tariff impact, platforms chose to absorb the costs themselves. Second, the enormous cost advantage of Chinese manufacturing.

In fact, after weathering the initial months, major e-commerce platforms gradually passed tariff costs through to selling prices — yet sales increased rather than fell. "Basically double-digit growth."

Kong believes that, at least in Mexico for now, the cost-performance ratio of Chinese goods remains hard to match. "Take the simplest example: a plastic bag costs 0.1 RMB in a Chinese supermarket, but 35 pesos in Mexico — about 13 RMB."

In his view, whether Mexico or Vietnam, bringing costs down to comparable levels within a few years seems unlikely. "Catching up to Chinese manufacturing is more likely a 20-to-30-year proposition."

Still, distant concerns exist. In Yu Yuanwen's view, against the backdrop of rising global trade protectionism, tariff hikes will be a long-term Mexican policy, unchanged by government transitions. And under U.S. pressure, the Mexican government may well impose stricter screening and access regimes on Chinese goods.

This concern is not unfounded. On July 2, 2025, President Trump announced a new trade agreement with Vietnam. Under it, U.S. import tariffs on Vietnam would be reduced to 20%, but "transshipped goods" routed through Vietnam while actually originating from third countries like China would face 40% tariffs — clearly targeting Chinese firms seeking to circumvent U.S. tariffs through rerouting.

"Like the two sides of a scale: on one side, Mexico's own manufacturing capabilities keep strengthening; on the other, tariff barriers keep rising. As one grows and the other shrinks, the balance will eventually break."

In fact, this substitution trend is already emerging in the auto parts sector. Gao Jiageng noted that Chinese companies currently in Mexico's auto parts business have basically completed supply chain localization. This stems from increasingly stringent USMCA rules of origin certification and traceability. "It's completely unlike a few years ago, when you could still get by with fudging."

Yu Yuanwen also believes that, compared to transshipment trade, Chinese companies might consider investing in Mexico's consumer goods supply chain. "For some light industrial daily necessities, building factories in Mexico to eventually cover all of Latin America and North America could, in the long run, be a bigger opportunity than auto parts."

New Energy: The Best Times Are Behind Us

Chinese participation in Mexico's new energy development has gone through three phases.

Mexico's geographic advantages are exceptional, with abundant sunshine making it one of the countries with the greatest solar potential. From 2012 to 2018, during the Peña Nieto administration, Mexico introduced a series of energy and financial reforms welcoming foreign capital. Driven by both clean energy demand and declining installation costs, Mexico enjoyed a golden period of new energy development.

But when the López Obrador administration took power (2018-2024), policy shifted toward protecting state-owned energy enterprises. In March 2021, Mexico revised its energy and electricity laws, granting the Federal Electricity Commission (CFE) dispatch priority while reducing procurement and incentives for private solar and wind power. This left numerous new energy projects stalled, with some large projects completed but unable to connect to the grid.

It wasn't until Claudia Sheinbaum took office in 2024 that government policy turned open again. But in the view of Tu Shuiping, Director of SPIC Zuma Energy Mexico, "the best times for new energy have already passed."

On one hand, the current Mexican government has accumulated heavy debts in power development, requiring greater annual investment. According to CFE's five-year plan, it needs $4 billion in annual investment, but its actual investment capacity doesn't exceed $1 billion. On the other hand, government openness in related areas remains limited. "For distributed solar, yes, the cap was raised from 500 kW to 700 kW, but that's still limited. Neighboring Brazil already raised it to 5 MW long ago."

Additionally, Mexico's target of CFE accounting for 54% of future generation capacity is becoming increasingly explicit. According to the Ministry of Economy's interpretation, foreign ownership in new large-scale power projects will likely be capped at 46% — unacceptable for SOEs seeking controlling stakes. "Tariffs aren't even the primary concern."

On investment opportunities, Tu believes large-scale ground-mounted solar prospects are largely exhausted. "Early transmission and distribution dividends have basically been captured. With more competitors entering, curtailment has already emerged in many areas, and the government will be stricter in approving grid connection permits for new solar projects." In certain niche areas, however, because many plants built during the last boom never achieved grid connection, and with curtailment worsening in some regions, supporting infrastructure will need to catch up. "There are more opportunities in energy storage and transmission and distribution."

Part 02

Practical "Pitfall Avoidance" Guide for Going Global

How to Choose Your Number One?

Initially, it must be a Chinese national; localization can gradually follow.

In Gao Jiageng's view, to crack the Latin American market, the startup phase requires a Chinese leader with real weight to get personally involved. "Remote management is unrealistic. The daily emergencies you face are completely unimaginable from China."

Kong Zhiqiang also candidly noted that when J&T first arrived in Mexico, its trunk transport vehicles were robbed. "Strikes and protests happen frequently, adding operational uncertainty."

In May 2025, customs employees at Manzanillo — Mexico's second-largest cross-border trade hub with the U.S. — declared an indefinite strike and blocked the port's southern access routes.

This port handles 22% of Mexico's total import-export freight volume. During the strike, supply chains for numerous Chinese companies were almost completely severed, with the auto parts sector particularly hard hit. Many production lines simply sat idle for over a month. Gao Jiageng remembers it vividly: "Only then do you truly feel how well companies back home are protected by the motherland."

But overseas, all problems must be faced alone. The Manzanillo strike is just the tip of the iceberg of local social conflicts. According to incomplete statistics, Mexico City alone saw at least eight major protest demonstrations in 2024, especially during election season. This demands that the number one of a globalizing company not only excel at factory management or strategic planning, but be proficient in "eighteen martial arts" — capable of making correct rapid decisions for any emergency.

Chinese companies habitually pursue absolute speed: set a target today, demand results tomorrow. "But with this mindset in Latin America, you'll be extremely uncomfortable, unable to understand why resources simply can't be mobilized, why costs are so high."

Tu Shuiping believes Latin American corporate management systems are projections of national political ecology, resembling ancient China's enfeoffment system, emphasizing hierarchical accountability upward.

"For example, when they run for mayor or governor, the winner forms a cabinet, appoints various ministers, ministers appoint bureau chiefs below them, bureau chiefs appoint division chiefs." The upside is that each level is only accountable to its superior, with strong execution. The downside is rigidity, which severely tests headquarters' management capabilities.

In his view, the core responsibility of the number one is to identify and achieve the company's core objectives. Headquarters' management of overseas branches must distinguish which metrics are core concerns that must be met, and which can be relaxed. "The essence of control lies in control, not management." After all, managing a localized team makes it hard to have it all. Some highly localized work — such as local marketing, customs liaison, or government relations — is often more efficient and cost-effective done by locals rather than headquarters assignees, and should be considered for delegation. Otherwise, management becomes extremely challenging.

Gao Jiageng also believes Chinese companies should treat employees of different nationalities with more universal equality. "Latin Americans value living in the moment, they're more relaxed. In terms of overtime and diligence, they definitely can't match Chinese people. But that doesn't mean their culture is inferior, and certainly not that because you're the boss, locals should unconditionally accept all your management. After all, we are the outsiders. The premise of cooperation is mutual respect."

Indeed, the other side of globalization is localization — it's impossible to rely entirely on Chinese employees. Yu Yuanwen candidly noted that one common trait of Chinese companies currently doing well in Mexico is having more localized talent.

In Yu Ke's view, on a 10-to-20-year timescale, Chinese companies going global will ultimately have to depend on local people. "In this regard, you can reference Western multinationals: they fix responsibilities for each position, one radish per hole." Companies only need to find the most specialized local person for each specific domain; if someone leaves, replacements can be quickly found.

J&T's approach is to strictly control Chinese expatriate quotas. Kong Zhiqiang stated that J&T overseas has over 95% local employees. Beyond a small number of Chinese managers, other positions prioritize locals, and every headquarters employee sent abroad must be personally interviewed by the CEO. The benefit is that Chinese personnel, to communicate with local staff, are forced to learn the local language and culture.

"We require Chinese nationals serving as first-level department heads to reach Spanish A2 level within one year," Kong told Anyong Waves. Whether in Southeast Asia, the Middle East, or Latin America, J&T encourages employees to put down roots and build families locally, and recruitment emphasizes bilingual Chinese locals.

"True localization means really putting down roots locally, not sending someone from headquarters for a three-year overseas stint before rotating back."

Some Important Written and Unwritten Rules

Tu Shuiping offered a vivid analogy.

If you draw an axis of legal system development across all countries, the far left would undoubtedly be some African nations: "as long as you can find connections, basically anything goes." The far right would be developed Western nations: "everything not prohibited is permitted."

Mexico sits at the center of this axis — here, you must be compliant, but you also cannot operate without connections.

Mexico's combined tax rate was previously relatively high, so some small and medium cross-border sellers chose gray customs clearance to reduce costs — a fuzzy zone between legitimate clearance and smuggling. This also meant customs clearance costs varied across every Mexican port.

"Expensive ports indicate extensive gray clearance there." However, with recent tariff policy normalization, surprise inspections are becoming increasingly frequent.

In Gao Jiageng's view, gray clearance is hard to completely eliminate in the short term; it's more likely a long-term game of cat and mouse. "Much imported goods are used to produce products for the U.S. market. Blocking them entirely at the border may not be what the Mexican government wants to see."

Still, for manufacturing companies, especially those with state capital backgrounds, compliance remains an untouchable red line. Otherwise, there's a real risk of "being fattened before slaughter."

Yu Ke told us that because manufacturing requires years of sustained investment, massive assets are sunk locally in fixed capital. Once a government faces revenue shortfalls and a company happens to be caught with compliance issues, even a minor problem can lead to license revocation or massive fines.

"Many people mention Mexico and think it's an especially corrupt country. But in fact, their government has some extremely smart people who have designed an incredibly sophisticated, cross-verifiable system. So don't harbor any illusions — any non-compliance will show up somewhere. It's just a matter of whether they choose to act on it, and when."

But compliance is also a double-edged sword, meaning everyone plays by the contract. Yu Yuanwen gave an example: if both sides agree to 30-day payment terms, dragging it out for half a year or even a year is common in China. But in Mexico, "such a company basically couldn't survive."

"Remember: the essence of any country's investment attraction is to bring economic development and prosperity to its people. The extreme involution model doesn't apply here. If you disrupt market balance so that no one can make money, they actually have many ways to address that."

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