Mexico Remains 'Attractive Option' for Trade Despite Tariff Uncertainty, Lawyers Insist
Mexico should remain an attractive option for importers despite volatility from U.S. tariff threats, Mexico-based trade lawyer Alejandro Gomez argued during a Feb. 26 webinar hosted by In-House Connect, with lawyers from Foley & Lardner.
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Gomez said that Mexico's labor force, manufacturing base and recent government efforts to encourage manufacturing make it an "attractive option for manufacturers to cut costs within the largest or the most important market in the world, the U.S." He noted that Mexican labor costs are cheaper than in China these days and certainly "lower than in the U.S. and Canada." The U.S. would be "blindsided" if it suddenly lost access to Mexican manufacturing and the "competitive edge" it gives U.S. companies, he said.
Gomez also predicted that the upcoming imposition of tariffs on Mexico is a bargaining tool and, if they are imposed, they will be short-lived, saying "my opinion is that tariffs will not be imposed on Mexico, and if they are imposed, they will be temporary." This prediction directly contradicts statements made on the same day by President Donald Trump, who indicated that he will be hard to satisfy on whether Mexico has done enough to stop fentanyl smuggling at the border (see 2502260032).
Even if tariffs are imposed, Gomez said, geography and demographics will make Mexico a necessary trading partner. Companies will want to "remain close to their primary consumer base [the U.S.]," and this, combined with Mexico's "attractive" domestic workforce and manufacturing capabilities, ensures that companies will continue to import from the country, he said.
Should Trump be true to his word and impose 25% tariffs on Mexican goods, Gomez suggested to importers that they could manipulate their supply chains to avoid the worst of them. Companies could continue to produce their goods in Mexico but "import essential components that would not be substantially transformed into the country," to avoid paying duties on them, or partially change production to the U.S., ensuring that "the essential components will be of this U.S. origin, but keeping everything else in Mexico."
Lawyers Fernando Camarena and Marcos Carrasco argued that Mexico is making strides to improve its labor laws and international trade administration. Carrasco highlighted the new IMMEX 4.0 program the Mexican government is developing, the maquiladora program, saying that it aims to "reduce the compliance burden of maquiladoras, and IMMEX companies."
Despite its economic heft, Gomez said that the U.S. still needs Mexico: "The U.S. is very capable, very strong, very diversified. However, it cannot simply produce everything that is needed by its market within its own borders."