Mexico’s footwear industry could benefit from US tariffs. But it’s not

Monterrey, Mexico – Juan Alvarado has owned a tiny footwear manufacturing concern successful Leon, Guanajuato, Mexico’s footwear manufacturing capital, for much than 15 years. But the existent commercialized and governmental tensions successful US-Mexico relations, coupled with tariff-related disruptions, are forcing him to see diversifying into different sectors oregon simply shutting down his business.

Alvarado told Al Jazeera that helium would typically employment up to 25 people, but he’s had to chopped that down to 15 now. “You’re against a partition and you can’t clasp connected either way. And it each depends connected investment.”

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Mexico’s tariff complaint is being negotiated, aft President Claudia Sheinbaum and United States President Donald Trump agreed to a 90-day extension, which is acceptable to expire connected October 31. Mexico continues to look a 25 percent tariff connected cars and a 50 percent tariff connected steel, aluminium, and copper, and 25 percent connected thing not covered nether the 2020 escaped commercialized US-Mexico-Canada Agreement (USMCA).

For Mexican industries similar footwear, which has faced declining competitiveness against Asian countries for decades, the tariffs the US has imposed connected different nations are seen arsenic an vantage for gaining a stronger foothold with Mexico’s apical trading partner.

Juan Carlos Cashat Usabiaga, president of the Chamber of the Footwear Industry of the State of Guanajuato (CICEG), is alert of the volatility US tariffs bring to business, but says that, for now, Mexico is being favoured since immoderate of its exports are covered by USMCA.

“I genuinely judge these tariffs being imposed connected different countries are really an advantage,” helium told Al Jazeera. “Speaking exclusively of footwear, you tin inactive export to the United States portion complying with the USMCA rules. That is, if you comply, you person zero percent tariffs. So this truly makes our state precise competitory compared to different nations that look tariffs of 20, 30, 40, oregon 50 percent.”

Trump’s tariffs, aimed astatine boosting US home industry, person created ripple effects. While immoderate successful Mexico spot these disruptions arsenic a model of opportunity, tiny concern owners similar Alvarado accidental that the existent geopolitical scenery and ostentation are endangering their investments.

Alvarado’s concern utilized to manufacture shoes for a institution that exports to the US. However, contempt USMCA, request has dropped connected relationship of tariff uncertainty, causing the institution to halt each orders from Alvarado.

“Production is presently halted. They were making 7,000 brace of shoes” [per week], of which Alvarado was supplying astir 2,000 pairs, helium said. “That was genuinely helping my business. [But] present they are making 800, 700 pairs.”

Apart from manufacturing for larger companies, Alvarado, successful caller years, had besides been increasing a caller income transmission by mailing shoes straight to US customers. This besides stopped aft Mexico suspended bundle shipments successful the aftermath of the US government’s determination to end the “de minimis” exemption that allowed packages worthy little than $800 to participate the US tariff-free.

China imports

Mexico ranks arsenic the world’s ninth-largest footwear producer, with much than 75 percent of its accumulation concentrated successful Guanajuato. Cashat says the manufacture has been severely affected by Chinese imports and dumping practices.

“We’ve seen a brutal driblet successful accumulation and jobs, impacting the industry’s GDP,” Cashat stated.

Last year, Mexico produced 214 cardinal pairs of shoes. By the extremity of August this year, accumulation had reached 134 cardinal pairs, according to CICEG, based connected information from Mexico’s nationalist statistic agency. The fig of workers successful the industry, too, shrank to 96,929 radical by the extremity of August, down 4,411 from a twelvemonth ago.

The Mexican authorities precocious restricted the usage of the IMMEX programme, launched successful 2006 for the impermanent import of materials intended for re-export aft processing. For decades, the misuse of the programme to import finished goods, peculiarly footwear and textiles from China, not lone caused unfair contention and taxation evasion by Mexican businesses, but successful the process besides decimated the section industry.

Marcelo Ebrard, Mexico’s system secretary, reported that betwixt 2019 and 2024, footwear accumulation saw a 12.8 percent decline, mostly owed to companies’ improper usage of the IMMEX programme. According to Ebrard, the impermanent intermission connected imports of finished shoes aims to boost nationalist production, combat contraband, and support the jobs of 130,000 nonstop workers and galore much indirect employees.

Mexico besides announced plans to acceptable its ain tariffs connected definite imports from countries similar China, with which it does not person escaped commercialized agreements. These measures are portion of Plan Mexico, a nationalist strategy designed to beforehand economical maturation and fortify the country’s relation successful planetary worth chains.

For Luis Rodriguez Tirado, CEO of Hormas El Arbol, a institution that has been producing shoes for the past 90 years, these tariffs and the intermission of IMMEX are important incentives for the manufacture to vie connected a level playing field.

“We tin vie with immoderate different country. If they inactive bushed us, I’m good with that, but lone connected adjacent terms,” helium said.

However, immoderate analysts presumption these measures simply arsenic a effect to the beardown unit Washington, DC has exerted connected the Mexican government, alternatively than arsenic a genuine effort to ace down connected illicit imports.

Workers successful Mexico’s ample informal assemblage trust heavy connected inexpensive Chinese products to prolong their businesses and gain a living.

Renato Balderrama, a prof astatine the Center for Economic Research and Teaching (CIDE), pointed retired that goods similar footwear and textiles often participate illegally, and helium believes it is hard for immoderate authorities to “clean up customs”, contempt bully intentions.

“We person an informal system that accounts for fractional of Mexico’s economy. So, if you artifact that income, radical either starve oregon merchantability drugs,” helium added.

Balderrama added that Mexico is successful urgent request of diversifying its exports, peculiarly toward Asia.

“The markets that person grown the astir and volition proceed to turn are those successful the Pacific Rim and South Asia. And this is precisely erstwhile we are cutting ties [with China] and becoming much babelike connected the United States.”

Made successful Mexico

Alvarado, the footwear manufacturer, defines Chinese imports arsenic a “cancer” that has been plaguing the industry. However, helium besides believes that tiny concern owners look accrued trouble navigating these challenging times owed to some a deficiency of fiscal enactment and the progressive governmental bureaucracy.

Experts and manufacture insiders hold that Plan Mexico sounds promising connected paper, but fiscal enactment and an integral implementation are cardinal to its success.

“The strategy has yet to beryllium afloat realised” and indispensable beryllium assigned the indispensable resources for the monolithic task ahead, Balderrama told Al Jazeera.

But erstwhile it comes to the footwear industry, it is not indispensable to commencement from zero, but alternatively to instrumentality an integral program to retrieve what has been mislaid successful caller years, Cashat said. “It’s an manufacture that has overmuch to offer. Today, companies are operating astatine conscionable implicit fractional their accumulation capacity, astir 55 percent,” helium added.

Rodriguez agrees that contempt the Mexican government’s caller measures, the footwear manufacture indispensable beryllium restructured. Organising and strengthening tiny and medium-sized businesses, and addressing the informal assemblage should beryllium the priorities, including helping them entree caller technologies and concern technification.

“It would beryllium indispensable to see those informal businesses that are being evaluated truthful they tin go ceremonial and tin person entree to amended backing and planning,” helium said.

A twelvemonth and a fractional ago, Alvarado’s concern was robbed. Guanajuato faces important information challenges owed to the beingness of organised transgression and pack activity. Micro and tiny enterprises look theft, extortion, and reduced income due to the fact that of these concerns. He applied for authorities enactment for microbusinesses, but aft seeing that the exertion process would instrumentality implicit a year, helium had to instrumentality retired a slope indebtedness to retrieve and proceed functioning.

“To support a squad of workers, they request a wage each week. If not, radical leave, and it’s harder to support a team,” helium said. “To support working, I had to spell into indebtedness with the bank.”