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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Borderlands: CBP opens new fastlane at Laredo’s World Trade Bridge

World Trade Bridge

On August 5, U.S. Customs and Border Protection (CBP) held a ribbon-cutting ceremony for the completion of the World Trade Bridge's new Free and Secure Trade (FAST) Lane.

The new $10 million paved lane is for northbound FAST empty tractor-trailers to run directly from the bridge, and will decrease wait times at cargo facilities. The FAST program allows expedited processing of trucks owned by commercial carriers that have completed background checks and fulfill certain eligibility requirements.

"The World Trade Bridge processes on average 16,000 trucks daily, carrying goods valued at more than $300 billion annually," said U.S. Rep. Henry Cuellar (D-Laredo). "The creation of this FAST Lane will streamline trade and promote economic growth in the region."

Around 500 empty trailers will be processed daily and the hours of operation for FAST Lane will be Monday through Friday, 8:00 a.m. to 4:00 p.m.

"These improvements serve as vital assets to not only Laredo, but the entire United States economy," said Laredo Mayor Pete Saenz.
CBP officials estimate they process around 8,000 northbound truckloads daily at the World Trade Bridge facility.

"The ever-growing traffic volumes have far exceeded the limits of the present facilities and we will work hand in glove with our stakeholders at the federal, state and local levels to assist with improvements that will facilitate traffic at the busiest cargo facility in the southwest border," said David P. Higgerson, director of field operations at the CBP Laredo Field Office.

There were 195,918 commercial vehicle crossings at the World Trade Bridge in June, representing a 0.7 percent increase from the same time last year, according to the latest data from the city of Laredo.

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Mexico first to ratify USMCA trade deal, Trump presses U.S. Congress to do same

USMCA Trade Deal

MEXICO CITY (Reuters) - Mexico on Wednesday became the first country to ratify the United States-Mexico-Canada Agreement (USMCA) agreed late last year to replace the North American Free Trade Agreement (NAFTA) at the behest of U.S. President Donald Trump.

By a vote of 114 in favor to 4 against, Mexico's Senate backed the deal tortuously negotiated between 2017 and 2018 after Trump repeatedly threatened to withdraw from NAFTA if he could not get a better trade agreement for the United States.

Mexican President Andres Manuel Lopez Obrador had already anticipated ratification this week in the Senate, where his leftist National Regeneration Movement (MORENA) and its allies have a comfortable majority in the 128-member chamber.

There has been little parliamentary opposition in Mexico to trying to safeguard market access to United States, by far Mexico's top export destination, and the trade deal was approved with overwhelming cross-party support in the Senate.

Mexico sends around 80% of its exports to the United States, and Trump last month vowed to impose tariffs on all Mexican goods if Lopez Obrador does not reduce the flow of U.S.-bound illegal immigration from Central America.

Lopez Obrador says he wants to avoid conflict with Trump, but noted at the weekend that the tariff dispute showed Mexico needed to become more economically self-sufficient.

Trump congratulated Lopez Obrador on Twitter for Mexico's approval. "Time for Congress to do the same here!" he wrote.

Lopez Obrador, meanwhile, posted a video on Twitter in which he called the Senate's approval "very good news" and said it augured well for Mexico's relations with the United States.

Canada, which has also fought with Trump over trade, is pressing ahead to ratify the deal. The main question mark hanging over its ratification is in the United States, where Democratic lawmakers have threatened to block the process.

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Trade War Update: Port Of Los Angeles No Longer Top ‘Port’ — It’s Laredo

Port of Los Angeles

The Port of Los Angeles is no longer the nation's leading port, further evidence that the U.S.-China trade war is scrambling the deck chairs of U.S. trade.

Laredo, a city of 260,000 hard on the U.S.-Mexico border, is.

In the month of March, the latest U.S. Census Bureau data available, Port Laredo's trade was $20.09 billion while trade through the Los Angeles port's was $19.66 billion. Laredo's trade was up 9.52% from February while the Port of Los Angeles' trade was down 10.01%.

Although it is just one month of trade, and although the Port of Los Angeles remains the nation's top-ranked port year-to-date among the more than 450 airports, seaports and border crossings, it is just one more sign that President Trump's efforts to force change in China's policies is having an impact.

In previous columns, I have written how China went from buying 57% of all U.S. soybeans to dropping 94.75% in one month. I have written about how China went from being the second-leading buyer of U.S. oil to buying none. I have written about how U.S. trade with China fell fasterearlier this year than at any time in at least 17 years. I have written that China now accounts for a lower percentage of U.S. imports than at any time since 2012. And I have written that Mexico is now the United States' leading trade partner, having replace China.

And now this.

At work, in part, is how important Mexico trade is to Laredo and how important China trade is to Los Angeles. Laredo, in particular.

No other port has handled more trade with one country than Laredo does with Mexico, more than $228 billion in 2018. That''s because last year and this year, Mexico has accounted for more than 97% of all Port Laredo trade.

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Mexico says it is close to U.S. metals tariff deal, waiting for Canada

Mexico Tariffs

WASHINGTON (Reuters) - Mexico is close to resolving its dispute with the United States over steel and aluminum tariffs without quotas but hopes Canada can reach a similar agreement before completing it, a senior Mexican official said on Wednesday.

Jesus Seade, Mexican deputy foreign minister for North America, told Reuters by telephone that a deal to remove the so-called Section 232 tariffs was "very close" but he wanted Canada to be in the same position in its negotiations with Washington.

"What we've been talking about for a week," he said, "is eliminating the 232 without any quotas," noting that it was "very possible" Canada could sign up to a "similar" deal.

Sudden movements in future trade could be handled via a "consultation and monitoring system," he added, noting Mexico still had the option of sealing a deal without Canada.

U.S. Treasury Secretary Steven Mnuchin also expressed optimism about a resolution to the steel dispute, but a top Canadian official avoided direct comment on that possibility.

"I think we are close to an understanding with Mexico and Canada," on resolving the tariffs, Mnuchin said at a U.S. Senate Appropriations subcommittee hearing. He did not provide any details about the potential agreement.

Canadian Foreign Minister Chrystia Freeland said she discussed the tariffs on Canadian metals with U.S. Trade Representative Robert Lighthizer on Wednesday, but declined to say whether the two countries were close to a deal.

"We made the case as we have been doing for some time that the best outcome for both Canadians and Americans would be to lift those tariffs and to have free trade between our two countries who have this fantastic trading relationship in place," she told reporters after the meeting in Washington.

A USTR spokeswoman declined comment on the meeting.

Asked about prospects for a deal, Freeland said she would not discuss Canada's negotiating strategy. She added that if Washington kept the tariffs in place, it would be "very, very problematic" for Canadian ratification of the new U.S.-Mexico-Canada Agreement trade deal (USMCA).

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Mexico Border Delays Seen Weighing on US Investment, Factories

Border Delays

More cargo from Mexico to the United States is being held up at the border, accompanied by increasing evidence that such delays are dimming prospects for American companies.

Slower trade between the countries since federal border officers recently were redirected to deal with a surge in migrants has been socking businesses with additional shipping costs. The effects likely will cause a modest headwind for second-quarter nonresidential investment growth — which cooled at the start of the year — and already helped to push a U.S. factory gauge to a two-year low in April, according to Bank of America Corp.

"The delays generate a meaningful direct cost for businesses," economist Stephen Juneau said in an e-mail May 6. The disruption may have a significant impact on the flow of goods, as more than 86% of Mexican imports enter the U.S. by land, and impose some $5.5 million in additional costs on U.S. businesses each month, he wrote in a report May 3.

Trucking company Werner Enterprises Inc. said on an April 25 earnings call that it expects border crossing to be "slow for the foreseeable future."

"Freight is still crossing the border at a very slow rate by comparable standards," said Derek Leathers, CEO of the Omaha, Neb.-based company.

Werner ranks No. 15 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

U.S. Customs and Border Protection said March 27 that trade processing would slow, with as many as 750 officers from crossings in the San Diego, Tucson, Ariz.; El Paso and Laredo, Texas, regions being re-assigned. President Donald Trump the next day renewed threats to close the border.

The Institute for Supply Management's factory survey last week showed April conditions at the weakest since October 2016, though still expansionary. The production component also fell to a more than two-year low, which Juneau said likely was in part because of border delays.

Ventus Global Logistics offer solutions to reroute your goods to avoid delays at the border. Contact us for a free quote.

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China and Canada fall away as Mexico becomes the US’ biggest trading partner

Trade with Mexico

In the trade war with the United States, China's loss is Mexico's gain.

China's bilateral trade with the US weakened in the first quarter of this year after export order front-loading from both countries started to fade. Mexico has taken advantage of
the trade tariffs on Chinese goods to become the US' top trading partner of the US so far this year, according to new data from the US Census Bureau.

This shows that while US President Donald Trump has stood firm on stopping Mexican immigrants on the US' southern border, he has not been able to stop the flow of Mexican goods, which are partially filling the gap left by Chinese goods affected by the trade dispute.

The news comes despite the fact that Trump has been trying to force a revised deal through Congress to replace the 1994 North American Free Trade Agreement, covering the trilateral trade bloc of Canada, United States, and Mexico.

The US had US$102.5 billion in goods trade with Mexico in the first two months of the year. In second place was Canada at US$97.5 billion and then China at US$96.7 billion, according to seasonally adjusted data from the US Census Bureau. Mexico had been in third place, behind Canada and China.

China's General Administration of Customs has said that from January to March, overall trade with the US fell 11 per cent year on year, to 815.8 billion yuan (US$121 billion). The US is now behind the European Union and the Association of Southeast Asian Nations in order of
China's biggest trading partners.

China was still the home to most US imports – US$80 billion – but that was down 11 per cent from January-February a year earlier. By contrast, Mexican exports to the US rose 5 per cent to US$58.7 billion over the same period.

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‘Confidence in Mexico’: U.S. and Mexican top brass to talk business, border

USA Mexico Trade

MERIDA, Mexico (Reuters) - A meeting of U.S. and Mexican government and business leaders on Thursday aims to shore up investor confidence in Mexico and defuse U.S. President Donald Trump's threats to close their shared border if illegal immigration is not halted

Part of regular business forum the U.S.-Mexico CEO Dialogue, the talks in Mexico coincide with renewed tensions over trade and the border after two years of uncertainty sparked by Trump's push to rework the North American Free Trade Agreement (NAFTA).

They also give Mexico an opportunity to address investor concerns about how President Andres Manuel Lopez Obrador has run Latin America's No. 2 economy since taking office in December.

"We want the American investors that visit our country to go back home feeling confident about their investments here," said Moises Kalach, a top executive in the CCE business lobby, which represented Mexico's private sector at the NAFTA talks.

Lopez Obrador and officials including his foreign minister and energy minister, plus U.S. Commerce Secretary Wilbur Ross and U.S. Chamber of Commerce President Tom Donohue, are scheduled to attend the two-day meeting in the city of Merida.

Among investors due to attend is Larry Fink, chief executive of the world's largest asset manager BlackRock Inc.

The leftist Lopez Obrador took power vowing to fight entrenched corruption, crime, inequality and poverty, scourges that cost Mexico billions of dollars every year.

He has said he wants to boost both private and public investment, but some of his early decisions, such as canceling a partially-built $13 billion Mexico City airport and steps to rein in the autonomy of regulatory bodies, have spooked investors.

Questions remain over the future of trade in the region because the deal agreed to replace NAFTA, the United States-Mexico-Canada Agreement (USMCA), has yet to be ratified.

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Border wait times swell amid customs officer shuffle to handle migrant crisis

border slowdown

NUEVO LAREDO, Mexico - U.S. President Donald Trump hasn't followed through on his threat to shut the border with Mexico, but one crossing here that connects this Mexican city with Laredo, Texas provided a glimpse of the chaos and economic disruptions that it would likely ensue.

Lines of 18-wheeled semi-trucks carrying auto parts, produce and other goods for U.S. consumers and businesses stretched more than six miles into Mexico Wednesday after the Trump administration shifted Customs and Border Protection agents from Laredo and other Texas border crossings to El Paso and the Rio Grande Valley to deal with the flood of asylum seekers from Central America. Waits to cross the World Trade Bridge, which normally run 30 minutes, reached more than three hours.

The impact of the delays was being felt on both sides of the Rio Grande, with those who depend on U.S.-Mexico trade barely able to consider what would happen if the Trump closed the border. Ernesto Gaytan, president of the Laredo company Super Transport International, which has 200 trucks on the American side of the border and 300 more on the Mexican side, said he couldn't put a number on it, but knew the delays were costing him money. A complete border shutdown, he estimated, would cost his company $200,000 a day.

On the other side of the border, Roberto Hernandez was idling at the back of the line with hundreds of 18-wheelers ahead of him. Hernandez doesn't get paid by the hour, but rather by the number of loads he delivers.

Usually, he makes four cross-border runs a day, earning the equivalent of about $15 per load. But he was only able to make two trips on Tuesday and his is daily pay fell to $30 from $60.

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Ventus Global Logistics operates out of every port in Mexico and we can reroute your goods through other ports even with a border slowdown or shutdown. In addition to land freight, our air and ocean freight services cover both consolidated shipments (LCL) and containers (FCL). Call us today for a FREE quote or fill out our online form.

Binational pact aims to keep industrial plants in border region

Binational Pact

Brownsville officials were among Rio Grande Valley economic development leaders who signed a bi-national collaboration agreement on March 5 between South Texas and the state of Tamaulipas, Mexico, aimed at boosting economies on both sides of the border.

The initiative was led by the Rio South Texas Economic Council and the Ministry of Economic Development of the state government of Tamaulipas, with the signing ceremony in Weslaco. Besides officials from Brownsville, also participating were economic development leaders from Alamo, Donna, Edinburg, Harlingen, Hidalgo, Laredo, McAllen, Mission, Palmview, Pharr, Roma, Rio Grande City, San Benito, Sullivan City and Weslaco.

From the Mexican side, in addition to Matamoros, were leaders from Altamira, Camargo, Ciudad Victoria, Diaz Ordaz, Guerrero, Madero, Mier, Miguel Aleman, Nuevo Laredo, Reynosa, Rio Bravo, Tampico and Valle Hermoso.

According to RSTEC, the agreement is intended to strengthen investment recruitment and job creation in communities north and south of the Rio Grande.

Mario Lozoya, executive director of the Greater Brownsville Incentives Corporation and one of the agreement's signatories, said the agreement was forged partly in response to a situation with U.S.-owned maquiladoras (industrial plants) in Matamoros that has prompted some of them to relocate to the United States or Mexico's interior.

A mandate from Mexico's new president, Andres Manuel Lopez Obrador, doubling the minimum wage along a narrow strip of the country's northern border, led to a dispute between labor unions demanding higher wages for employees making above minimum wage and "maquila" management, who refuse to raise wages, arguing that their employees were already making the wages Obrador sought to bring about.

Another piece of Obrador's northern-border program entailed slashing the value-added tax on maquilas in the border region so they could afford the wage increase. At any rate, tens of thousands of maquila workers have walked off the job in Matamoros.

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