Mexico Manufacturing Challenges + Opportunities for 2025
01.24.25Navigating change is always challenging as there’s a level of uncertainty that comes with it. However, there are also core foundations to rely on that make it easier to adapt.
Right now the lack of clarity on proposed tariffs on Mexico is hi
gh on the list of challenges some manufacturers expect to face. Though, even as a new U.S. presidential administration is officially in place, it remains to be seen if and when certain campaign promises will come to fruition.
Economists have already pointed out the contradictions of President Trump’s campaign promise of “100% tariff(s) on every single car coming across the Mexican border” in an effort to boost both U.S. revenue and U.S. manufacturing.
While tariffs do bring in some revenue as it’s a tax American importers pay for goods from other countries, they also make the production of foreign cars more expensive, which means fewer Americans will buy them, causing tariff revenue to go down.
However, as of Inauguration Day in the U.S., President Trump has already decided to hold off on imposing tariffs for the time being but plans to issue an executive order to begin studying trade issues with countries including China, Canada, and Mexico.
Regardless, having seen this administration in office before, several positives remain as this potential tariff problem lingers overhead, including the solid infrastructure of Mexico shelter services to keep global production moving forward.
1. Mexico continues to be the number one manufacturing partner of the U.S.
In 2018, when Trump’s administration imposed 25% tariffs on China, shelter companies in Mexico benefited and expanded their production, eventually making Mexico America’s number one trading partner.
The potential for aggressively taxed import products from Mexico to the U.S. doesn’t negate the significant economic advantage trade between these two countries provides. Most U.S. (and other foreign) manufacturers need production plants in Mexico as their products and technology continue to expand.
The high cost of doing business in the U.S. combined with the lack of industrial workers do not make for favorable conditions, especially compared to manufacturing in Mexico. Due to the cost-effectiveness, U.S. manufacturers will continue to import products, though imposed tariffs may determine which country the U.S. does business with.
Mexico remains a top-tier option as part of the North American trade bloc, its close proximity to the U.S. audience, and a proven global impact on trade for the past several decades.
2. Growth of the technology sector and enforced restrictions
There is growth within the North American semiconductor industry due to the increasing demand in the automotive and consumer electronics sectors. To prevent data access, global automakers have been instructed not to use Chinese hardware or software in new cars.
The finalized rule from the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), which was first proposed in September 2024, prohibits “certain transactions involving the sale or import of connected vehicles integrating specific pieces of hardware and software, or those components sold separately, with a sufficient nexus to the People’s Republic of China (PRC) or Russia.”
The BIS rule particularly focuses on hardware and software integrated into the Vehicle Connectivity System (VCS) and software integrated into the Automated Driving System (ADS). These critical systems allow for external connectivity and autonomous driving capabilities in vehicles that are connected.
The purpose of this ruling is to deny malicious access to systems that could allow adversaries access and collection of sensitive data and the ability to manipulate cars remotely on American roads. The rule is in effect for Model Year 2027 for passenger vehicles (defined as those under 10,001 pounds) and “requires certain importers and manufacturers to submit annual Declarations of Conformity to certify their compliance with the prohibitions.”
3. Extended protections through the USMCA
The trade agreement between the U.S., Mexico, and Canada (USMCA) is set for review in 2026 to evaluate how it’s working. Though no major modifications are expected, specific provisions including original content rule, and repercussions against intellectual property violations, promote and protect trade within this trade bloc.
Per the USMCA, at least 75% of automobile content must be made in North America to qualify for duty-free trade. While U.S. manufacturers would appreciate the opportunity to create this content fully in America, the feasibility is simply not possible. It’s the main reason why international trade, specifically nearshoring manufacturing to Mexico, has been so prolific in the rise of global expansion for automakers, as well as other sectors.
U.S. companies leverage the manufacturing advantage in Mexico while maintaining research and development at their headquarters. Maintaining cost-effectiveness and supply chain efficiency in this way is essential, as it’s too expensive to handle the demand solely in the U.S.
4. Mexico manufacturing still presents plenty of opportunity
To counteract any challenges on the horizon, Mexico is taking steps to stay in good standing with the U.S. as its main trading partner. During this in-between time, there is an opportunity for Mexico manufacturing for those who aren’t taking a wait-and-see approach as the U.S. administration decides next steps.
U.S. and other foreign manufacturing companies that take action now will have access to greater building availability, more favorable lease rates and terms, as well as the first pick for skilled employees.
Furthermore, implementing the solid infrastructure and flexibility of Mexico shelter services is the most viable way for U.S. and other foreign manufacturers to expand production. This has been a successful business model for decades and greatly benefits global economies, including the U.S.
As the months go on, the demand will grow as more manufacturers commit to their nearshoring plans, which will lead to more expensive industrial real estate and less opportunity to find the best talent in the desired location.
5. The strength of the shelter companies in Mexico
The numerous benefits of Mexico shelter services for U.S. and foreign manufacturers hold steady amidst change. These include:
- Minimized risk and liability – Operating under a shelter protects foreign manufacturers from legal exposure to Mexico’s authorities.
- Reduced learning curve – All required permits, certifications, and other compliance measures are in place through the shelter, along with local insight and experience in choosing facilities and navigating trade and customs compliance.
- Reduced costs – There is an automatic savings on labor, infrastructure, permits, and license fees when working under a shelter. Plus, there won’t be the need to hire outside consultants for administrative departments.
- Ownership of production control – Manufacturers maintain full control over all processes and property rights so they can focus on production rather than being slowed down by administrative tasks.
- Quick startup times – With many shelter services implemented simultaneously, it’s faster to launch production, typically in as little as three to four months, compared to the time it takes to set up a standalone entity.
- Flexibility to grow – Backed by decades of industry experience and expertise, a Mexico shelter company guides manufacturers through different growth phases, allowing them to scale up as needed.
Though there have been strong statements given by America’s current administration, the actions carried out may not be as heavy-hitting.
Either way, IVEMSA is keeping a close watch on any changes and continues to be a resource for clients as they adapt and grow the industry’s inevitable challenges.
For more information about the advantages Mexico shelter services offer, contact our team today.
Sources:
https://www.npr.org/2025/01/19/g-s1-43062/trump-tariffs-revenue
https://www.nytimes.com/2025/01/20/us/politics/trump-tariffs-executive-order.html
https://www.ft.com/content/f83f30be-d673-4f00-b9e5-9e9293512010