• Mexico is the third biggest trading partner of the U.S., behind just China and Canada
  • Mexico is becoming a hub for tech and electronics manufacturing
  • Consideration of the USMCA had little impact on expansion considerations

A survey by international law firm Foley & Lardner LLP indicates manufacturers are increasingly eyeing Mexico for expansion plans because of cost advantages and access to the U.S. market.

Mexico is the third biggest U.S. trading partner, behind only China and Canada. The U.S. ran a $101.75 billion trade deficit with Mexico in 2019. President Trump signed the U.S.-Mexico-Canada trade deal, which replaces the North American Free Trade Agreement, Jan. 29, easing fears of a trade war and making Mexico a more attractive site for manufacturing expansion.

“Our survey shows that a large majority of executives are moving or have moved portions of their operations from another country to Mexico,” Foley partner Christopher Swift said in a press release.

“That can be traced to three things: global trade tensions, particularly in Asia; Mexico’s geographic proximity to the U.S.; and NAFTA’s legacy, which all combine to make the country stable and a natural destination for international expansion.”

The Foley survey found Mexico is becoming a hub for technology and electronics manufacturing, largely because of the size of its auto industry and the rush to incorporate innovative technology in vehicles as the industry explores the viability of autonomous and electric vehicles.

“Mexico is becoming one of the fastest-growing hubs for technology and electronics manufacturing in North America, owing in part to Mexico’s deep roots in the automotive industry and the race to incorporate new innovative technology in automobiles,” Foley partner Vanessa Miller said. “In the competitive global market, Mexico manufacturing offers a number of cost advantages.”

A quarter of the 160 executives surveyed said they moved overseas operations to Mexico from other international sites because Mexico was viewed as safer, and two-thirds of those who planned to open their first international operations said they would start in Mexico.

The survey found consideration of the U.S.-Mexico-Canada trade agreement had little impact on decisions on whether to expand or establish operations in Mexico, with the ability to comply with rules of origin and Mexican business law the top considerations, followed closely by corporate tax and structuring.