China-Mexico freight traffic surges in Trump, Biden tariff era, as companies find ways to evade U.S. trade war

New information shows a surge successful commercialized betwixt China and Mexico astatine a clip of tough tariff talk during the statesmanlike campaign. Customs information shows a important summation successful earthy materials and components from China entering Mexico to beryllium manufactured into afloat assembled items that are past transported into the U.S. via obstruction oregon by truck.

"We are seeing much Chinese companies moving their accumulation facilities from China to Mexico," said Jordan Dethwart, president of cross-border logistics specializer Redwood Mexico, adding that these facilities usage Chinese third-party logistics companies, which supply services specified arsenic warehousing, inventory management, and shipping. "They tin bring successful their parts and earthy materials from China and past nutrient the merchandise successful Mexico astatine their Chinese facilities and past vessel those goods into the U.S. They are adding immoderate worth by operating successful Mexico and taking vantage of the USMCA [United States-Mexico-Canada Agreement] to person their merchandise made successful Mexico."

This nearshoring of manufacturing enables companies to alteration a product's root of goods, besides referred to arsenic the "economic nationality" of a product. When components oregon earthy materials are imported into a state and utilized to implicit a product, they acquisition what commercialized officials telephone a "substantial transformation" and the manufacturing determination determines the duties and different charges that tin beryllium levied connected that product. Companies importing Chinese components and earthy materials into Mexico and manufacturing their products successful Mexico would person a "Made successful Mexico" stamp connected them, not "Made successful China."

"The cardinal sectors person ever been automobiles and textiles successful presumption of determining origin," said Mary Lovely, Anthony Solomon elder chap astatine the Peterson Institute for International Economics. "To person a merchandise that's labeled Mexican arsenic opposed to Chinese successful origin, you person to substantially alteration the product, which means it has to go a antithetic product. So if I get a full acceptable of woody boards, and it is manufactured into a desk. The merchandise has to alteration customs categories."

The manufacturing displacement has besides changed the mode European companies are operating crossed a wide scope of products. "We person European-based companies who erstwhile solely manufactured successful China and are present manufacturing their products here," said Simon Cohen, laminitis and CEO of Henco Logistics. The beardown gait of nearshoring demand, with items being manufactured, boxed up, and shipped to the U.S. from Mexico, is being driven by the "China Plus One" strategy and the USMCA, helium said.

Data from freight analytics steadfast Xeneta shows China to Mexico instrumentality commercialized up by 26.2% from January to July 2024, aft increasing by 33% successful 2023. The period of May, successful particular, recorded the astir containers from China into Mexico, with June lone a couple of 100 containers shy of May volume.

VesselBot, which besides tracks instrumentality flows shows, says the three-month play of April, May, and June recorded the highest volumes of Mexico exports to the U.S this year.

Growth successful request for containers shipping imports from China into Mexico successful the archetypal fractional of 2024 is further fueling suspicions it has go a "back doorway into the U.S.," said Peter Sand, main expert for water freight complaint benchmarking and quality level Xeneta. "This way has grown progressively fashionable implicit the past year-and-a-half," helium said.

Mexico's escaped commercialized agreements and economical alliances marque the state an charismatic determination for mounting up manufacturing operations. Mexico has 13 escaped commercialized agreements spanning 50 countries, including the USMCA, and escaped commercialized agreements with the European Union, the European Free Trade Area, Japan, Israel, 10 countries successful Latin America, and the 11-country Trans-Pacific Partnership. Mexico is besides a subordinate of the Pacific Alliance, a commercialized bloc formed by Mexico, Chile, Colombia, and Peru.

The surge successful commercialized and manufacturing betwixt the apical geopolitical and economical rival to the U.S. and its confederate neighbour comes amid continued governmental headwinds, with new tariffs connected China and a imaginable crackdown connected Mexican manufacturing some cardinal run issues for erstwhile President Donald Trump.

"President Trump accelerated the displacement successful USA-China commercialized relations," said John Piatek vice president of consulting astatine procurement and proviso concatenation consulting, services, and bundle solutions company, GEP Worldwide. "He continues to marque China to beryllium the bogeyman and has indicated helium volition get much aggressive."

But President Biden has retained astir of Trump's commercialized protections, and his medication has besides been assertive successful "propping up U.S. industries," specified arsenic semiconductors, Piatek said, arsenic good arsenic introducing new commercialized barriers to EV technology, among different areas, including aesculapian supplies.

Piatek said the information shows imports from Mexico to the U.S. person accrued 20 percent-plus annually betwixt 2020 to mid-2024, successful opposition to the inclination of China to U.S. trade. Imports straight from China to the U.S. decreased from 17.7% to 13.5% from 2020 to mid-2024.  

On the run trail, "Both candidates are speaking astir introducing much commercialized barriers, not fewer," Piatek said.

Lovely said further tariffs travel with antagonistic consequences. "The much tariffs we make, and the much consciousness of havoc we create, the much inducement that a achromatic marketplace springs up astir it, arsenic good arsenic corruption with officials successful processing countries," Lovely said.

The U.S. authorities is going aft imaginable violations of commercialized policy. If a merchandise is changed precise small and it is shipped to the United States, it could beryllium recovered successful usurpation of U.S. countervailing duties and anti-dumping duties, Lovely said, citing recent cases related to star panels.

The import surge aligns with a emergence successful cross-border trucking from Mexico to the U.S., peculiarly done Laredo, Texas. Data from Motive, which tracks trucking visits to North American organisation facilities for the apical 5 retailers, shows a grounds level of motortruck borderline crossings and crushed import volumes, cementing Mexico arsenic the No. 1 U.S. importer amid declining Chinese imports. The apical 3 U.S. destinations for Mexico exports are El Paso, Houston and San Diego.

A caller study connected nearshoring by Moody's identified a fig of announcements by car companies, including overseas OEMs, regarding plans to put successful Mexico. "The automotive assemblage is simply a cardinal subordinate successful expressions of involvement to grow successful Mexico by companies specified arsenic Tesla, BMW, Ford and GM, on with Asian manufacturers including BYD and Kia," Moody's noted.

Mexico's authorities reported $36 cardinal of overseas nonstop concern successful 2023, a 27% summation implicit the erstwhile year. In 2024, done mid-year, that fig was $31 billion, a caller record, according to the government.

Trump has threatened to enforce a 100% tariff connected vehicles made successful Mexico. During the caller statesmanlike debate, helium renewed claims helium has made successful the past astir Mexican manufacturing linked to China. "They're gathering large car plants successful Mexico, successful galore cases owned by China. ... They're gathering these monolithic plants, and they deliberation they're going to merchantability their cars into the United States due to the fact that of these radical [Biden administration]," Trump said.

Tesla CEO Elon Musk announced a intermission connected Tesla's gigafactory successful Monterrey, Mexico. In the company's fiscal update for the archetypal fractional of the year, Musk said uncertainty surrounding the tariffs would marque it impractical to put heavy successful the plant. Tesla said it volition ramp up accumulation astatine its existing plants successful Fremont, California, and Austin, Texas.

In a September statement, the Americas affiliate of Chinese electrical car elephantine BYD denied reports it was pausing plans for a Mexican plant, identifying it arsenic a "very applicable market."

Volvo, which is majority-owned by Chinese genitor institution Gheely, announced past period plans for a $700 cardinal motortruck manufacturing plant successful Monterrey.

Mexico has go captious to 'safeguarding' proviso chains

Evading tariffs is not the lone crushed for the emergence of Mexico arsenic a commercialized conduit for China, arsenic logistics professionals are progressively utilizing the Mexican way to "safeguard their proviso chain," Sand said.

"Mexico is precise overmuch successful absorption for American importers seeking to grip the risks they look from higher tariffs and the U.S. East and Gulf seashore labour quality that threatens strikes to deed connected October 1," helium said.

Based connected the bills of lading, the integer receipts of water freight containers, among apical companies exporting from Mexico into the U.S. are Tesla, tyre companies Pirelli and Michelin North America, Hyundai and Kia affiliate Mobis Parts America, and industrials steadfast SFK USA.

Charles Van der Steene, president of Maersk North America, said it has seen unthinkable maturation successful Mexico to U.S. commercialized this year.

"We're talking (growth) successful wide treble digits," said Van der Steene. "The maturation successful Mexico is real. Some interaction mightiness beryllium linked to tariffs, but overall, and by and large, we spot the robust improvement of the Mexican economy."

In March, Maersk announced its caller Tijuana, Mexico, installation that would optimize the increasing measurement of cross-border trade. The caller warehouse is targeting the transport of items successful the technology, automotive, retail, and manner sectors. The institution announced successful September the opening of a 402,000-square-foot installation successful El Paso, Texas, to enactment the increasing logistics services request astatine the border.

According to Moody's, successful the past 3 decades, the worth of Mexican exports has accrued by much than tenfold. "Mexico's commercialized equilibrium with the U.S. has improved significantly, from a shortage of $2.4 cardinal successful 1993 to a stratospheric surplus of $234.7 cardinal successful 2023," it reported.

Moody's besides noted U.S. nonstop concern and reinvestments pouring into Mexico multiplied from $3.5 cardinal successful 1993 to $20 cardinal successful 2023.

Data from the Bureau of Transportation Statistics' TransBorder Freight programme — which breaks down North American freight by mode of transportation, commodity type, and geographic item for U.S. exports to and imports from Canada and Mexico — besides shows the spot of Mexico/U.S. transborder trade.

The apical 10 commodities from Mexico exported to the United States see vehicles, computer-related machinery equipment, and parts.

Mexico freight commercialized way tin beryllium cheaper

Companies utilizing the China-Mexico-U.S commercialized way are capable to execute little freight costs erstwhile the avoided tariffs are factored into the equation, according to a CNBC breakdown of the costs utilizing August freight rates from assorted logistics providers. That's contempt stronger pricing connected the way owed to its caller popularity.

Once water containers are connected land, U.S. shippers tin determine to determination the containers by motortruck oregon obstruction into the United States tariff-free.

The wide outgo of moving a azygous instrumentality is estimated astatine betwixt $10,100-$12,300 for water freight/truck and $8,700-$8,800 by water freight/rail. This is somewhat little costly than sending a completed merchandise from China to the U.S. directly, which is subjected to tariffs. 

According to Redwood Mexico, the terms for roundtrip trucking from the Pacific Coast Port of Lazaro, Mexico, to Laredo, Texas, for a azygous instrumentality ranges betwixt $3,900-$6,100. The approximate cost to obstruction a azygous instrumentality from the Port of Lazaro to Laredo is $2,700. Transporting a instrumentality by obstruction from the Port of Lazaro, to Monterrey, California, would beryllium astir $2,600.

According to Freightos, the terms of water freight from China to the U.S. West Coast is $6,459.20, portion China to the U.S. East Coast is $9,480.20, and China to the Gulf Coast is $9,475.

ITS Logistics tells CNBC that the approximate all-in freight outgo for an East Coast instrumentality is betwixt $11,530.20-$14,745.20 by truck, and $11,030.20 for rail. The terms of a instrumentality imported into the West Coast is betwixt $10,959.20-$13,659.20 by truck, and $10,160.20 for rail.

If Chinese imports were subjected to the 301 tariffs, 232 tariffs, 373 (patent infringement), anti-dumping, and countervailing duties, the further tariffs would beryllium added to the outgo of importing the product.

A 20-foot instrumentality of household washing machines holding astir 50-60 washing machines, which are taxable to a 7.5% tariff if imported from China, are 1 illustration of the tariffs' added economical wound to the logistics bill.

"At the mean import terms of $400 a unit, a U.S. importer would beryllium determination betwixt $1,500 and $1,800 successful commercialized warfare taxes connected a 20-foot instrumentality of washing machines," said Erica York, elder economist astatine the Tax Foundation. "Bilateral tariffs should beryllium expected to pb to commercialized diversion, and that's precisely what happened successful the aftermath of the commercialized war. Not lone did the tariffs pb to higher costs for Americans, but they besides led to disruptions and reallocations of commercialized flows and concern relationships," York said.

"The displacement toward nearshoring has highlighted the outgo benefits of water freight from Asia to Mexico, with mean rates astir $4,200 per instrumentality and trucking from Mexico City to the U.S. averaging $4,000," said Tim Robertson, CEO of DHL Global Forwarding America, though helium added that logistics decisions should not beryllium based solely connected cost, with transit time, reliability, security, and work levels arsenic important to rates.

Election threats, caller USMCA commercialized woody scrutiny

Ian Arroyo, main strategy serviceman of Freightos, said the summation successful Chinese goods flowing into Mexico is mostly being driven by a operation of geopolitical factors, proviso concatenation reconfigurations, economical strategies, and marketplace opportunities that began during the pandemic. 

"It's evident astatine this constituent that owed to these proviso concatenation disruptions not lone are overseas non-domestic companies utilizing Mexico to physique successful a nett simplification of cost, but American companies arsenic well," said Arroyo. "The question is volition the adjacent medication instrumentality a hard look astatine the USMCA exemption to determination Asian goods done Mexico?"

When the Trump medication renegotiated NAFTA into the USMCA successful 2020, 1 cardinal proviso was a request for the countries to statesman reviewing the commercialized woody aft six years, a process that volition statesman successful July 2026. If 1 oregon much of the 3 parties decides to not renew the agreement, determination volition beryllium nary contiguous extremity to the deal, but it volition trigger years of uncertainty for the markets astir the eventual destiny of the commercialized route. 

"I americium acrophobic that Mexico is getting a atrocious rap due to the fact that 301 duties tin beryllium avoided successful manufacturing successful immoderate state astir the world. It does look that China is uncovering Mexico to beryllium a bully platform, though, for their products (materials and parts). I would deliberation that this volition beryllium a taxable of treatment successful the 6-year review," said Evelyn Suarez, laminitis of the Suarez Firm, which consults with corporations connected customs and planetary commercialized instrumentality and policy.

If the nations are each successful statement to proceed the deal, "We bash not expect this travel to dilatory down," Arroyo said. "As planetary commercialized continues to germinate successful an ever progressively analyzable geopolitical environment, Mexico's relation arsenic a cardinal node successful North American proviso chains is apt to grow, further expanding the travel of goods from China into the country."

Logistics managers archer CNBC clients are already strategizing to front-load products done Mexico and U.S. ports successful the precocious autumn to mitigate the hazard of a Trump statesmanlike triumph starring to further Chinese tariffs arsenic precocious arsenic 60%-100%.

"Just similar helium did successful his archetypal term, President Trump volition proceed to usage the leverage of the United States to negociate amended commercialized deals and enactment American workers, farmers, and families first," said Karoline Leavitt, national property caput for the Trump campaign. "The Harris-Biden Administration has allowed China to rip america disconnected with policies similar their extremist electrical conveyance mandate, and it volition lone get worse if Kamala Harris is president and Tim Walz, who honeymooned successful China, is successful the White House alongside with her."

The Harris run did not respond to requests for comment.

Supply concatenation companies chasing the opportunity

Logistics companies including DHL, Maersk, Uber Freight, and ITS Logistics person been expanding their footprint to seizure the further freight opportunities moving successful and retired of Mexico. North American freight obstruction institution CPKC is completing the operation of its caller planetary obstruction span from Laredo, Texas to Nuevo Laredo, Tamaulipas, expected to beryllium operational successful Q4 of this year.

Paul Brashier, vice president of planetary proviso concatenation at ITS Logistics, said since 2018 the institution has seen a dependable summation successful request for capableness retired of Mexico to Texas markets including Laredo, San Antonio, Austin, and Dallas/Ft. Worth. 

"Over the past 2 years request has grown exponentially," Brashier said. "We are heavy investing in  Texas with cross-border services successful Laredo, a one-million quadrate ft organisation halfway successful Haslet, and our logistics offices successful downtown Ft. Worth."

Mollie LeBlanc, vice president of planetary operations for Uber Freight, said the logistics institution is seeing immense request for its services successful Mexico. "Our income squad successful Mexico is sending america much and much inquiries successful respect to importing straight from China into Mexico, and it's growing," said LeBlanc. "There's a beardown request for truckloads coming retired of Mexico, truthful our squad is providing customers with consultation and proscription absorption services to integrate oregon uplevel their cross-border logistics operations."

LeBlanc described Uber arsenic an aboriginal capitalist successful Texas cross-border logistics located connected some sides of Laredo, and said the spaces are present successful afloat use. "We besides person astir 1.5 cardinal quadrate feet of warehouse abstraction spanning 10 locations successful Mexico, including Monterrey and Mexico City. We're not an asset-based provider, but arsenic we proceed to spot heightened demand, we're exploring ways to supply our customers with the tools they request to expand," LeBlanc said.

Recent Biden Administration increases successful tariffs connected Chinese exports are further fueling the commercialized flows, but experts accidental the improvement volition not yet beryllium short-term driven.

Hamish Woodrow, caput of strategical analytics for Motive, says Mexico could beryllium the apical importer to the U.S. until astatine slightest 2030, and request for AI, a cardinal exertion rivalry with China intimately linked to nationalist information concerns, could substance this further.

"There volition beryllium a request for much factories to nutrient computer-related machinery and parts and we could spot the improvement of much manufacturing and assembly plants successful Mexico," said Woodrow. "With Mexico's strategical presumption and adjacent proximity to the U.S., we tin ideate continued maturation successful this assemblage and Mexico imports wide arsenic Mexico expands its relation successful making and sending these products to the U.S. All of this could support Mexico arsenic the No. 1 importer to the U.S. until the extremity of the decade."

For U.S. exporters, Mexico's commercialized liberalization efforts mean that the Mexican marketplace is 1 of the astir unfastened and competitory successful the world.

"We are seeing this inclination successful the de minimis parcels arsenic well," said Christine McDaniel, elder probe chap astatine the Mercatus Center astatine George Mason University, referring to a commercialized signifier that has attracted caller scrutiny from the Biden medication successful narration to alleged "abuse" by Asian-based online retailers Temu and Shein. "Consumers volition people look for the lowest prices. Trade is similar water, it flows. If you instrumentality a measurement back, commercialized is diverting due to the fact that of comparative advantage. Tariffs similar the 301 and different restrictions are apt driving China to get to the U.S. marketplace done different means. U.S. user request is there. They volition find a mode to conscionable it similar utilizing Mexico arsenic a platform."

Lovely tells CNBC it's wholly predictable erstwhile tariffs up to 25% oregon much are levied connected a state that their manufacturers are going to find strategies to debar those tariffs.

"This is what we're seeing," Lovely said. "So is it a backmost door? In a consciousness it is. Is it violating immoderate agreements? Almost surely not. In fact, going mode backmost to the archetypal impetus for NAFTA, which came from Mexico — Mexico came to the Americans due to the fact that they wanted overseas nonstop concern into Mexico."