What US companies should know about expanding manufacturing to Mexico

manufacturing in Mexico

As of 2019, Mexico is the largest goods trading partner with the U.S. with over $600 billion in imported and exported goods. This relationship has created 1.2 million jobs as of 2015, according to the latest data available from the U.S. Department of Commerce. It's also been reported, as of February 2019, that U.S. trade with Mexico increased 3.36%, while trade with Canada decreased by 4.12% and with China by 13.52%. This illustrates the direct impact of the current administration's trade war with China in particular, which ultimately has had negative repercussions for the U.S.

Generally speaking, products manufactured in Mexico are high-mix, low-volume, such as automotive and aerospace parts. This level of product is more expensive to move from China to North America when compared to shipping from Mexico. They also require more engineering skills than many products manufactured in China, which trend toward low-mix, high-volume, such as sunglasses or clothing.

As a result of Mexico's cost-effectiveness, global companies with a stake in the North American market, including Nestle and the BMW Group, have increased investments in their Mexican factories in recent months. In 2014, Nestle planned a $1 billion investment over five years to build and expand three of its factories in Mexico. And earlier this year, the BMW Group announced its new automotive plant in San Luis Potosi, Mexico as a boost to their "regional production flexibility in the Americas."

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