WASHINGTON — President-elect Donald Trump has indicated that one of his top priorities when he takes office next week will be to impose steep tariffs on Chinese imports, a move he claims would protect American jobs and bolster domestic manufacturing.

But if recent trends are any indication, one of the biggest beneficiaries might be workers in Mexico. 

After Trump levied tariffs on billions of dollars’ worth of Chinese goods in his first term, a growing number of companies moved manufacturing operations from China to Mexico. Industry analysts and executives working with Mexican manufacturers said that with Trump promising to escalate the trade war, they are seeing a renewed wave of interest from companies looking to shift production from China to Mexico.

“It’s absolutely déjà vu, and it’s just getting started,” said Raine Mahdi, whose company, Zipfox, connects businesses with manufacturers in Mexico. “The last time, this issue caught the tail end of the Trump administration, and then it pretty much died off with the Biden administration. Now it’s already starting before Trump is even officially in office. It’s not going to just go away. Companies are not going to be able to wait it out.”

There are generally no tariffs on goods made in Mexico that are shipped to the United States under the USMCA trade pact among the United States, Canada and Mexico — similar to the previous North American Free Trade Agreement — though Trump has threatened Mexico with new tariffs if it doesn’t do more to stop the flow of immigrants and drugs across its border.

The migration of manufacturing to Mexico could undermine Trump’s promise to voters that ratcheting up tariffs on China would give companies incentives to bring production back to the United States and give American companies a more even playing field. During Trump’s first round of China tariffs, the number of companies moving production for the U.S. market out of China increased. But rather than relocate that production to the United States, many companies went to other low-cost countries, instead. 

“It will produce jobs in a few sectors who get protection and where there’s not a way to make it offshore, but for most companies it just moves it from China to Vietnam or Mexico,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economic. “I really do think it’s a false promise.”

Since his election, Trump has threatened to put tariffs on goods from Mexico on day one of his administration. But doing so would violate the USMCA trade pact — a deal Trump touted as a major negotiating victory during his first term. Breaching the agreement could trigger legal challenges and retaliatory tariffs that would affect U.S. companies, lawyers and trade policy analysts have said. It could also cause upheaval in the financial markets and increase prices for consumers on everything from cars to groceries, they said.

The United States will be able to start renegotiating the USMCA pact in July 2026 under a provision in the agreement. If the three countries don’t agree to extend the deal, it will terminate in 2036.

But even with the looming uncertainty of tariffs, companies have continued their interest in Mexico, said Alejandro Delgado, Mexico country manager for SiiLA, a real estate data analytics firm. Along with the low trade barriers, the close proximity to the United States means cheaper shipping costs and the ability to avoid potential bottlenecks at U.S. ports. Mexico also has relatively low labor costs, with a minimum wage of around $20 a day in the region near the U.S. border.

“Since Donald Trump’s election, Chinese companies’ interest in Mexico has remained, but with some uncertainty,” Delgado said. “Of course, there is this threat of implementing new tariffs, but the sense is that Mexico is in a better position to negotiate with the U.S. than China.”

In Nuevo León, an area just south of the U.S. border, industrial parks full of Chinese companies have been springing up in recent years. Among those opening operations there are the equipment maker Lingong Machinery Group, which announced plans for a $5 billion industrial park, and the appliance maker Hisense, which said it would spend $260 million on a facility that it expects to create 7,000 jobs. Adjustable bed manufacturer Keeson Technology invested $30 million in a plant, and the Chinese furniture maker Kuka Home opened operations in Mexico in 2020 and announced a $150 million expansion in 2022 that it said would employ 3,500 people.

In total, nearly $4 billion in investment deals were announced in 2023 by Chinese companies and an additional $1.4 billion were recorded in the first half of 2024, according to data compiled by the research firm Rhodium Group. While that is a relatively small amount compared with other countries with deeper ties to Mexico, it’s nearly four times the average Chinese investment in Mexico from 2014 to 2020, the report found.

The footprint of industrial real estate occupied by Chinese firms has doubled since 2021, with the largest investments coming from companies manufacturing higher-end products for the automotive and tech sectors, according to data from SiiLA. More than half of Chinese-based companies currently occupying industrial space in Mexico weren’t present in the country before 2020, SiiLA said. 

“The Chinese are creative, they’re ambitious, they’re aggressive, and you can try to tariff them and contain them as best as you can, but they’ll always try to find the side route, and that’s what they’ve done with Mexico,” Mahdi said. “You can try to plug all the holes, but they’ll make a new one, because that’s what they do. Their country is about manufacturing for the world. They’re the best at it, and they want to continue to hold that position as the world’s manufacturing hub.”

To qualify as “made in Mexico,” products must undergo a significant transformation in Mexico even if their components originate from other countries. Under the USMCA trade agreement, if a Chinese company imports parts for an appliance or a piece of furniture and assembles it in Mexico, that item is classified as an import from Mexico rather than from China.

In addition to Chinese-owned companies’ opening operations in Mexico, U.S.-based and other multinational corporations are looking to shift their manufacturing of products for the U.S. market from China to Mexico to avoid tariffs and to lower shipping costs and delivery times. As a result, China’s share of U.S. imports has fallen from 22% in 2018 to 11.5% in the first half of last year, according to data from J.P. Morgan. Mexico exported more goods to the United States in 2023 than China for the first time in more than two decades.

“We have seen significant foreign companies coming into Mexico, not only from China but countries like Germany and Japan, and not only in manufacturing industries but also construction companies, logistics companies, packaging companies,” Delgado said.

The shift in manufacturing from China to Mexico could also upend Trump’s proposal to use the money the United States collects from tariffs to fund a variety of other policy priorities, since products made there are generally tariff-free. Under Trump’s last wave of China tariffs, much of the revenue went to payments to help cover farmers’ losses from retaliatory tariffs China placed on U.S. agricultural products.

The trend hasn’t gone unnoticed by members of Trump’s incoming administration. Sen. Marco Rubio, R-Fla., Trump’s nominee for secretary of state, wrote a letter in September urging President Joe Biden to stop Chinese firms from “exploiting Mexico’s duty-free entry to the United States.”

“Allowing Chinese firms — which routinely benefit from slave labor, stolen intellectual property, and massive state subsidies — to circumvent American trade enforcement and exploit our free trade agreements threatens American production,” Rubio wrote. “Our leaders must work diligently to replace Chinese production with American production, and that of our trading partners. Congress passed a free trade deal with Mexico—not China. Immediate action must be taken to prevent the Chinese Communist Party from exploiting USMCA and weaponizing this important trade deal.”

Trump’s threats and uncertainty around the future of the USMCA agreement have led to widespread uncertainty for some companies. Tesla CEO Elon Musk, a Trump ally whom Trump has tasked with slashing federal spending, told investors in July that he was putting plans to build a factory in Mexico on hold over Trump’s threat during the campaign to put tariffs on cars being shipped to the United States from Mexico.

“There’s tremendous uncertainty. We don’t know what’s going to happen,” said Ed Brzytwa, vice president of international trade for the Consumer Technology Association. “There are all these numbers being thrown out there by the president-elect. It’s impossible for companies to plan with this kind of uncertainty. They’re in a holding pattern. They’re all waiting to see. They’re doing a lot of scenario planning, contingency planning.”

But regardless of how Trump’s tariff threats materialize, Brzytwa doesn’t see a major shift in technology manufacturing coming back to the United States because of the high costs, a shortage of workers and difficulty in building new manufacturing facilities in the United States. Moving production of all technology products out of China and Taiwan and back to the United States would cost companies $500 billion and lead to workforce shortages, a report by CTA found.

“If the goal is to move production back to the United States, that is completely infeasible,” Brzytwa said. “In the United States, we don’t have the existing capacity, and it’s going to take a long time to build it, if we can at all. With our workforce, we’re at full employment — it’s almost impossible to find a workforce to build consumer technology products at scale.”